Pursuant to section 161D of the Climate Change Response Act 2002, I, The Honourable James Shaw, Minister for Climate Change, give the following notice requiring information on the production of cementitious products for the purpose of informing decisions for a review of allocation to industry, in accordance with section 161D(3)(d) of the Climate Change Response Act 2002.

Notice

1. Title and Commencement

(1) This notice may be cited as the Call for the Provision of Data (Production of Cementitious Products) Notice 2020.

(2) This notice takes effect from and including 25 August 2020.

2. Interpretation

(1) Unless the context otherwise requires:

Act means the Climate Change Response Act 2002.

Activity outputs are the outputs used for the calculation of the revenue of the activity and mean the outputs specified in clause 2(2)(a) and (b).

Basis of preparation means the form available at https://www.mfe.govt.nz/node/27012.

Data collection rules means the methodologies for data collection specified in Schedule 1 of this notice.

Declaration means the statement of declaration located at https://www.mfe.govt.nz/node/27012.

Excluded emissions means the emissions specified in Schedule 3 of this notice.

Financial years means the financial years beginning on 1 July and ending on 30 June for each of the periods 2016/2017, 2017/2018 and 2018/2019 during which the person carried out the activity.

Included emissions means the emissions specified in Schedule 2 of this notice from the sources listed in Emissions Rule 1 of Schedule 1.

Product (basis of allocation) means:

1. total tonnes, on a dry weight basis, of Portland cement clinker produced by carrying out the activity as described;
2. total tonnes, on a dry weight basis, of cement produced by carrying out the activity as described.

Data Form means the data table template located at https://www.mfe.govt.nz/node/27012.

(2) Activity means the physical and chemical transformation of:

• calcium carbonate compounds (CaCO₃, limestone) or other calcium carbonate (CaCO₃) feedstocks; and
• clay or other silicon dioxide (SiO₂, silica), iron (Fe), aluminium oxide (Al₂O₃, alumina), and other feedstocks

into cementitious outputs that:

1. involves the fusion of inputs at a temperature greater than 1000 ºC into Portland cement clinker consisting of at least 60% by mass of calcium silicates, and a maximum magnesium oxide (MgO) mass content of 4.5%; and
2. may involve the further transformation of this Portland cement clinker, produced as a result of (1), into cement through a process of blending and grinding with other suitable feedstocks; and

where the outputs are

1. Portland cement clinker that is suitable for the subsequent manufacture of cement specified below
2. cement that complies with the relevant New Zealand Standards for cement (NZS 3122:2009, NZS 3123:2009, and NZS 3125:1991) and any other relevant international standards required for export cement consignments.

(3) Saleable has its ordinary meaning as understood by participants in the relevant market, subject to subclauses (a) to (d):

1. Saleable is an output produced to a level at which it would ordinarily be considered by participants in the relevant market:
   1. to be the output of the process; and
   2. to have a commercial value as that output.
2. A sub-standard product which is discarded is taken not to be saleable or of saleable quality.
3. An output which is recycled back while carrying out the activity as defined to produce a new output is not saleable or of saleable quality.
4. Material which is scrapped or lost before it is packaged as a product that is saleable or of saleable quality:
   1. is not saleable or of saleable quality; and
   2. is not to be included in an amount of product (basis of allocation).

(4) Expressions have the same meaning as defined in the Act or Regulations under the Act unless the context otherwise requires.

3. Data Required to be Provided

(1) Any person carrying out the activity on the date of this notice must provide to the Ministry for the Environment (“Ministry”) data for the financial years for the activity in the form of the Data Form, calculated in accordance with the data collection rules, together with the completed Declaration and Basis of Preparation.

(2) In calculating the data for the activity, the person must include only input data related to the included emissions (as outlined by the emissions rules below), and must exclude the excluded emissions.

4. Deadline for Provision of Data

The data required by clause 3 of this notice must be provided to the Ministry within 50 working days of the date of this notice.

Schedule 1

Revenue Rules

1.Revenue must be calculated as the quantity of saleable activity outputs for each of the financial years, multiplied by an appropriate market price, exclusive of GST, for each activity output for each of the financial years.

2. Quantity of activity output(s) is either the direct measure of activity output or is calculated from units sold and changes in inventory. The same methodology must be used for all years.

3. The market price must be a ‘plant gate’ price for the activity output. It is the price determined for the output under the applicable accounting standard. This is the fair value of the product, as defined under New Zealand Equivalent to International Accounting Standard 18 Revenue (NZ IAS 18), adjusted for transport costs to reflect the market into which it is sold. If New Zealand Equivalent to International Financial Reporting Standard 15 Revenue from Contracts with Customers (NZ IFRS 15) is applied, the transaction price of the output is allocated to the product based on the relative stand-alone selling price of that product. The market price for the output must be calculated for each of the financial years either from the revenue received from all external activity output sales during each of the financial years, divided by the number of units of external activity output sales during each of these years; or by using an observable market price for each of the financial years that is appropriate to the duration of time when the output was produced in those years. An observable market price must be based on a relevant price listed on an international exchange, a price obtained from an industry analyst’s report or a price derived from government or industry body statistics.

4. Market price must be converted from foreign currencies to New Zealand dollars at the historical rate appropriate to the period of activity output.

Emissions Rules

1.Data must be supplied for each financial year from only the following emissions sources, expressed in tonnes of CO₂ equivalent via the prescribed equations and emissions factors:

1. the direct use (for example oxidation or use as feedstock) of any coal, natural gas, used oil, or waste oil as part of the activity; and
2. the direct use ( for example oxidation or use as feedstock) of any coal, natural gas, used oil, or waste oil to generate steam that is used as part of the activity; and
3. the direct use of geothermal fluid as part of the activity, including the direct use of geothermal fluid to generate steam that is used as part of the activity; and
4. any of the activities listed in Part 4 of Schedule 3 of the Act carried out as part of the activity; and
5. the direct use of any liquid fossil fuel in stationary equipment; and
6. fugitive coal seam gas from coal that is used as part of, or to generate steam that is used as part of, the activity; and
7. the electricity used as part of the activity.

2. Emissions must be calculated using the applicable formulae and emission factors specified in these data collection rules and in the Data Form. Direct measures cannot be used as a substitute.

3. Emissions from the direct oxidation or use as feedstock of coal or natural gas must be calculated as zero when either (1) the feedstock is used to produce an obligation fuel defined in the Climate Change (Liquid Fossil Fuels) Regulations 2008, or (2) the production of the output is eligible to earn emission units under the Climate Change (Other Removal Activities) Regulations 2009.

4. Emissions for which no obligation exists under the Act due to an exemption made by Order in Council under section 60 of the Act must be recorded as zero.

5. Total emissions from a co-generation facility, such as a combined heat and power plant must be allocated to an activity in proportion the plant’s output. Total emissions from co-generation must be split between heat/steam and electricity, with efficiency rates of 80% and 35% respectively. The heat/steam emissions must then be allocated to the activity in proportion to its use of the output of heat from the plant.

Emissions allocated to heat/steam production must be estimated using the following formula:

Where:
E_H = emissions allocated to steam production
H = steam output (MWh)
e_H = assumed efficiency of steam production
P = delivered electricity generation (MWh)
e_P = assumed efficiency of electricity generation
E_T = total direct emissions of the combined heat and power system
E_P = emissions allocated to electricity

6. The following specific formulae must be used in estimating direct emissions and fugitive coal seam gas emissions:

Coal
Emissions = ∑(A_i × CV_i × EF_i)
where:
A_i = tonnes of coal consumed for the relevant coal class,
CV_i = calorific value of the relevant coal class,
EF_i = emissions factor of the relevant coal class,
i = index of the relevant coal class.

Fugitive coal seam gas
Emissions = ∑(A_i × EF_i)
where:
A_i = tonnes of coal consumed (from all coal classes) from the relevant mine type,
EF_i = emission factor of the relevant mine type,
i = index of each relevant mine type.

Natural gas
Emissions = ∑(A_i × EF_i)
where:
A_i = terajoules (tonnes if LPG) of natural gas consumed from the relevant natural gas source or field,
EF_i = emission factor of the relevant natural gas source or field (use the national average if the gas field(s) is not known),
i = index of each relevant natural gas source or field.

Geothermal fluid
Emissions = ∑(A_i × EF_i)
where:
A_i = tonnes of geothermal fluid consumed from the relevant source,
EF_i = emission factor of the relevant geothermal fluid source,
i = index for each relevant geothermal fluid source.

Used or waste oil
Emissions = ∑(A × CV × EF)
where:
A = tonnes of used or waste oil consumed,
CV = calorific value of used or waste oil,
EF = emission factor of used or waste oil.

Liquid fossil fuels
Emissions = ∑(A_i × EF_i)
where:
A_i = kilolitres of liquid fossil fuel consumed from the relevant source,
EF_i = emission factor of the relevant liquid fossil fuel source,
i = index of each relevant liquid fossil fuel source.

7. Emissions from industrial processes must be calculated using the formulae set out in Part 3 of the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009.

8. The emission factors used in calculating emissions must be those listed in Schedule 2 of the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009, and those listed in the Schedule of the Climate Change (Liquid Fossil Fuels) Regulations 2008.

9. Indirect emissions from electricity use must be calculated using the following formula:

Emissions = A × EAF
where:
A = consumption of electricity (MWh) used as part of the activity,
EAF = relevant electricity allocation factor.

10. For eligibility purposes, electricity emissions must be estimated using an electricity allocation factor of 1 tonne of CO₂-e per megawatt hour of consumption.

11. For allocative baseline purposes, electricity emissions must be estimated using an electricity allocation factor of 0.537 tonnes of CO₂-e per megawatt hour of consumption.

12. Best endeavours must be used in calculating emissions. Simplified and reasonable emission calculation methods of the person’s own design can be used for specified small emissions sources that are either excluded or included emissions, and are, in aggregate, estimated to be no more than 5% of total emissions from the activity at the site, provided that a 5% change in total estimated emissions would not change the eligibility status of the activity, if the activity of the person was considered in isolation when making a decision about eligibility. All methods used must be disclosed in the Basis of Preparation.

13. All emissions associated with the activity must be counted, regardless of whether the output is of saleable quality.

Data Preparation Rules

1.The methods, assumptions and calculations used to produce the data must be disclosed in the Basis of Preparation along with the data in the Data Form.

2. Where uncertainties arise when determining emission and revenue data, these uncertainties must be declared in the Basis of Preparation.

Schedule 2

Included Emissions

Emissions that must be included in any information provided in response to this notice are emissions resulting from:

1. the direct use (for example oxidation or use as feedstock) of any coal, natural gas, used oil or waste oil, or the use of geothermal fluid, or electricity, as part of the activity as defined, including from machinery, equipment and processes which are integral to, and essential for, the physical, chemical and/or biological transformation involved in the activity as described, including, for example:
   – machinery used to move materials within and as part of the activity
   – control rooms, laboratories, maintenance workshops
   – machinery used to create non-electrical energy for use in the activity as defined
   – the processing of by-products where they involve the recovery of materials for re-use within the activity or are necessary for the activity to proceed as described
   – onsite processing of waste materials from the activity to comply with regulatory obligations;
2. the direct use (for example oxidation or use as feedstock) of any coal, natural gas, used oil or waste oil, or the use of geothermal fluid, or electricity, to generate steam that is used as part of the activity as described;
3. the use of liquid fossil fuels in stationary equipment;
4. coal seam gas emissions that escape in the process of mining coal (fugitive coal seam gas emissions);
5. waste heat recovery that is part of the activity as described;
6. processing together of specific raw materials (including limestone, clay and other materials) by crushing, pre-homogenisation and grinding, to meet the specific chemical composition required for the clinker making process, as well as any subsequent grinding or mixing of that specifically prepared mix as part of the clinker making process;
7. the processing of Portland cement clinker and other feedstocks including grinding, rolling, milling and blending processes to produce cement;
8. kiln dust production and reprocessing;
9. reject production where this is not recycled in the process.

Schedule 3

Excluded Emissions

Emissions that may not be included in any information provided in response to this notice are emissions resulting from:

1. the use of machinery and equipment, and other processes, that are not integral to, nor essential to, the physical, chemical, biological, and/or other transformation taking place when the activity as defined is carried out;
2. any extraction or production of raw materials, that are subsequently used when the activity as defined is carried out (excluding fugitive coal seam gas emissions);
3. the transportation of inputs used in the activity to storage at the location where the activity as defined is carried out;
4. the transportation of outputs of the activity from storage at the location where the activity as defined is carried out to another location;
5. the transportation of intermediate products between different locations where the activity as defined is carried out;
6. operations that are complementary to the activity as defined, including (but not limited to) packaging, head office operations, and administration and marketing (whether carried out at the same location where the activity is carried out or at a different location);
7. the generation of electricity at the location where the activity is carried out;
8. the generation of steam that is not used as part of the activity;
9. crushing of raw materials prior to the continuous crushing, pre-homogenisation and grinding stages to make the specific mix required to produce Portland cement clinker;
10. processing of any clinker that is produced at another plant, including the grinding, rolling, milling and blending processes, to produce cement.

Dated at Wellington this 25th day of August 2020.

Hon JAMES SHAW, Minister for Climate Change.

Explanatory Note

This note is not part of the notice but is intended to indicate its general effect.

This notice, which comes into effect on 25 August 2020, requires any person carrying out the production of cementitious products (as that activity is defined in the notice) to provide the information requested by the Minister in accordance with the data collection rules specified in the notice. Only the emissions set out in Schedule 2 of the notice from the sources listed in Emissions Rule 1 of Schedule 1 of the notice should be included, and those emissions set out in Schedule 3 of the notice should be excluded.

The information is being requested to assist the Minister to inform decisions on a review of allocation to industry and is consistent with section 161D(3)(d) of the Act.

The Data Form, Declaration, and Basis of Preparation required by this notice, together with the guidance document for filling in these documents can be downloaded from https://www.mfe.govt.nz/node/27012.

The Data Form, Declaration and Basis of Preparation must be completed and returned to the Ministry for the Environment within 50 working days of the date of this notice. Please provide this information in the original file format to the Ministry as attachments via the email industrialallocation@mfe.govt.nz. If you cannot email the forms, please contact the Ministry to arrange another method.

While the notice does not require submission of the source information and records on which the data in the Data Form is based, it would be prudent to retain this information for a period of seven years. The Minister is able to request any further information that he considers necessary to enable the verification of the accuracy of the information provided under this notice.

Persons to whom this notice applies should note that, under section 161D(6) of the Act, if they fail to supply the required information by the date specified, the Minister may give a notice to the person that requires the information to be provided within 10 working days. Failure to provide this information within that time period will render the person ineligible for an allocation of New Zealand units.

Persons should also note that it is in their interest to supply the required information to ensure decisions on a review of allocation to industry are based on data that is representative across New Zealand.

In addition, it is an offence to knowingly provide altered, false, incomplete or misleading information (section 132 of the Act) or, with the intent to deceive and for the purpose of obtaining a material benefit or avoiding a material detriment, to fail to provide information or to provide altered, false, incomplete or misleading information (section 133 of the Act).