5. Appendix - Assumptions
Where possible, source data for these assumptions are from government sources. The assumptions were also reviewed late 2004 by the Officials Committee for Sustainable Energy (OCSE), a committee consisting of inter-departmental representatives. Variations on three of these assumptions (GDP, oil/coal price) were selected to construct the low, medium ("Most Likely"), and high scenarios on the basis that they would have the greatest effect on emissions projections.
5.1 GDP
The GDP values used are the Treasury budget forecasts from 2004-2008 and the Treasury long range growth forecasts for 2009-2020.2 A further study on historical data was undertaken, the historical variance plotted and scaled to the relevant time period of interest. This study found that +/-0.7% was the most likely variance over a 20 year period.
| Year | Low emissions scenario | "Most Likely" | High emissions scenario |
| 2005 | 1.7 | 2.4 | 3.1 |
| 2006 | 2.1 | 2.8 | 3.5 |
| 2007 | 2.6 | 3.3 | 4.0 |
| 2008 | 2.3 | 3.0 | 3.7 |
| 2009 | 1.9 | 2.6 | 3.3 |
| 2010 | 1.8 | 2.5 | 3.2 |
| 2011 | 1.7 | 2.4 | 3.1 |
| 2012 | 1.4 | 2.1 | 2.8 |
| 2013 | 1.3 | 2.0 | 2.7 |
| 20203 | 1.0 | 1.7 | 2.4 |
5.2 Exchange Rate
Values closely reflect the long term average since floating of the dollar in 1985.
| Year | US$/NZ$ |
| 2005 | 0.67 |
| 2006 to 2020 | 0.60 |
5.3 Oil Price
Data was originally sourced from IEA (see International Energy Agency: World Energy Outlook 2004). The IEA oil prices are based on real, long run prices, and do not reflect the current volatility in world oil markets. It is important to note that the price New Zealand pays for its oil is usually similar to the normally quoted West Texas intermediate traded on the NYMEX market. The key factor for prices for modelling is not the absolute level, but the rate at which prices increase over time.
| Year | High Price Scenario | "Most Likely" | Low Price Scenario |
| 2005 | 37.50 | 32.50 | 30.00 |
| 2006 | 38.13 | 32.88 | 24.00 |
| 2007 | 38.75 | 33.25 | 24.00 |
| 2008 | 39.38 | 33.63 | 24.00 |
| 2009 | 40.00 | 34.00 | 24.00 |
| 2010 | 40.63 | 34.38 | 24.00 |
| 2011 | 41.25 | 34.75 | 24.40 |
| 2012 | 41.88 | 35.13 | 24.80 |
| 2013 | 42.50 | 35.50 | 25.20 |
| 2014 | 43.13 | 35.88 | 25.60 |
| 2015 | 43.75 | 36.25 | 26.00 |
| 2016 | 44.38 | 36.63 | 26.40 |
| 2017 | 45.00 | 37.00 | 26.80 |
| 2018 | 45.63 | 37.38 | 27.20 |
| 2019 | 46.25 | 37.75 | 27.60 |
| 2020 | 46.88 | 38.13 | 28.00 |
| 2021 | 47.50 | 38.50 | 28.40 |
| 2022 | 48.13 | 38.88 | 28.80 |
| 2023 | 48.75 | 39.25 | 29.20 |
| 2024 | 49.38 | 39.63 | 29.60 |
| 2025 | 50.00 | 40.00 | 30.00 |
5.4 Coal Price
Whilst South Island coal was found to be considerably cheaper by $2/GJ, when electricity transmission costs were factored in (2 c/kWh or $1.70/GJ coal equivalent) this price advantage was found to be negligible.
| Year | High price scenario | "Most Likely" | Low price scenario |
| 2005 to 2020 | $4.00 | $3.75 | $3.50 |
5.5 Gas
A constant, new discovery rate of 60 PJp.a. from 2009 onwards is assumed. A price of $6.50/GJ for gas for electricity generation in 2007 is assumed, rising to $7.25/GJ in 2020 for the "Most Likely" scenario. This is calculated on the basis of a current backstop price of $7.80/GJ for LNG, although this also increases over the outlook period.
5.6 Methanex
Methanex is the gas-to-methanol plant operating in Taranaki. Methanex is currently operating at 30-40 PJp.a. of gas which is half the rate it was operating at previously. This plant is modelled to close by mid-2006, owing to the expiry of its Maui gas contract.
5.7 Energy Efficiency Measures
No EECA targets will be included in the "Most Likely" scenario - the targets will be reported separately by the CCO under the policies section of the main report.
5.8 Projects to Reduce Emissions (Carbon Credits)
The effects of carbon credits from the Projects Mechanism are modelled for electricity generation in the "Most Likely" scenario and "High" and "Low" scenarios derived from this. These are modelled via a reduction in installed costs of the relevant type of low emission generation. Modelling analysis indicates an effective reduction in costs of up to 0.6 c/kWh.
5.9 Carbon Tax
A carbon tax of $15/tCO2 from April 2007 is modelled. This is applied to all sectors except the heavy industry sector. For the heavy industry sector it is assumed that Negotiated Government Agreements (NGA) are applied and that these offsetting effects are already incorporated in the forecasts received for these sectors. The effect of NGA's are not modelled in any other sector.
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