Growers of fresh tomatoes, cucumbers, capsicums and cut roses may be eligible for an allocation of NZUs.
Growers in the horticulture sector do not have an obligation to report their emissions or surrender New Zealand Units (NZUs) under the New Zealand Emissions Trading Scheme (ETS).
Some New Zealand based growers are eligible to apply for an Industrial Allocation of NZUs, based on the type of crop they produce.
Eligible activities in this sector are:
- production of fresh tomatoes
- production of fresh cucumbers
- production of fresh capsicums
- production of cut roses
Growers of these products are eligible for an Industrial Allocation of NZUs because they are considered to be "Emissions Intensive and Trade Exposed."
This means that, because of the ETS, these growers face an increase in the cost of powering (i.e. heating) their greenhouses, but due to international competition, they are not able to pass these increased costs on to their customers. The government has attempted to mitigate this cost by providing an allocation of NZUs, which a grower can then sell or utilise to pay for energy costs (for example, with a coal provider).
Industrial Allocations are calculated using production data, as opposed to a grower's actual power costs, because this incentivises growers to reduce emissions by switching to sustainable or renewable power sources which do not have an ETS cost, as they will continue to receive a financial benefit through their allocation.
Applications for Industrial Allocations are made via the New Zealand Emissions Trading Register (the Register). Applications for an Industrial Allocation of NZUs must be received by 30 April of each year.
Allocations for unsold product
If you have produced product with the intention of selling it, but have been unable to sell it you may still be eligible for an allocation. The Climate Change (Eligible Industrial Activities) Regulations 2010 states that 'saleable', means that the product is of a quality generally considered by persons who are regularly in the market for that product to be:
- fit for sale; or
- of commercial value.
And excludes any product that:
- is substandard and has been discarded by the person who produced the product
- is recycled while carrying out an eligible industrial activity
- is scrapped or lost before it is packaged for sale
Below is an example using tomato production:
If you have grown tomatoes with the intention of selling them as a fresh tomato and they are fit for sale, but:
- you are not able to find a buyer so they are discarded;
- or they get damaged and are canned.
You can still get an allocation for these tomatoes (provided that none of the exceptions below apply). The exceptions are tomatoes that are:
- substandard and discarded by you;
- recycled during production (for example used as a fertiliser for other tomatoes);
- and scrapped or lost before you package them for sale.
If these exceptions apply, the tomatoes will not be of saleable quality and you will not be able to get an allocation for these tomatoes.
Measurements and calculations
Counting production as being eligible for an allocation
You should calculate the amount of product produced in agreement with regulation 5 of the Climate Change (Eligible Industrial Activities) Regulations 2010. This states you must use direct measurement or measurement calculated from units of product sold and changes in inventory. If neither of these methods is practical the regulations allow you to use a different method to calculate the amount of product “produced”. This is as long as you take all reasonable care to make sure the method is the most accurate of the different methods that may be available.
If your standard practice is to measure your production inventory when produce leaves the gate, then this is the ‘sale’ date you should use (i.e. at the time of sale). If your standard practice is to measure your production inventory when you issue an invoice for your produce, then this is the ‘sale’ date you should use (i.e. at the time of invoicing).
Providing the weight of your product in tonnes
The allocations for some activities are based on the total tonnes of product produced. If you are required to provide the weight of your product in tonnes but you don't currently record your production by weight, you will need to take all reasonable care to accurately estimate the weight of product produced.
Below is an example of how to calculate your total tonnes, using cucumber production.
You can start by weighing a crate of cucumbers that is representative of your crop (less the crate weight) and dividing by the number of cucumbers. You can use this as an average weight to apply to the total number of cucumbers produced. You will need to re-estimate the weight of cucumbers produced if the original estimate no longer accurately represents the average weight of your crop.
If you had a 5,000m2 greenhouse, with an average weight of a telegraph cucumber around 420 grams, and average production of 95 cucumbers per square metre. This grower would work out their tonnes as follows:
|Number of cucumbers = (95 x 5000)||475,000|
|Average weight of cucumbers in grams||Multiplied by||420|
|To convert into tonnes||Divided by||1,000,000|
|Tonnes of cucumbers||=200|