A plan to buy three years' worth of carbon credits in advance could save millions of dollars when the Omarunui landfill begins paying its way under the New Zealand Emissions Trading Scheme (ETS) next year.
The landfill is jointly owned by the Napier city and Hastings district councils which will consider a proposal to buy credits, or "New Zealand Units", to account for the next three years, to take advantage of current low trading prices.
The proposal was backed by the Omarunui Refuse Landfill joint committee this week but would go to each council for final approval in July.
The landfill must begin surrendering the units from January 1, 2013, to match its methane emissions. It's likely the rate or percentage of units to be surrendered would be phased in over the following three years.
The committee was told the units it had to buy were priced at around $20 each in 2009 but were down to $6 in June, prompting it to consider a forward contract for 2013 to 2015.
Landfill customers, including commercial operators, already paid a landfill levy of $100 per tonne to the government which was used on waste minimisation initiatives. So the committee was keen to keep the new ETS fee as low as possible, chairman Wayne Bradshaw said.
"We've budgeted in the council's long term plan for the fee to be $20 per tonne of waste coming into the landfill because there was an assumption that was likely to be the cost for buying units.
"Things have changed, the price has come down to about $6 or $7 per tonne and we are saying that is an ideal level to lock in.
"For our users, it will give them some certainty when setting their budgets if we're able to lock in this price for three years.
"And every year we will review the situation to see if we need to extend it."
Mr Bradshaw said the move protected the landfill from a possible rise in the market over the three year period.
The committee was told the total cost over that time would be about $1.5 million, subject to waste volumes.
The council's waste services manager Martin Jarvis said the landfill could earn a discount on the ETS fee in future years because of its ability to burn off methane emissions on site. The long term plan was to capture enough gas to be able to turn it into electricity.
"We have a flare which burns off emissions and that's up and running now. It means we can apply for a unique factor which means our obligations under the ETS are reduced."
Landfill customers had been kept up to date with the looming ETS fee via letters.
If the councils agreed to the proposal, the committee planned to ask that the units be bought as soon as possible. It would then meet with landfill customers to outline the changes.