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New Zealand's greenhouse gas emissions fell 3 per cent in 2009, but the improvement was largely due to better inflows into the hydro lakes.

The annual greenhouse gas inventory report for 2009, released yesterday, recorded total emissions of 70.6 million tonnes of carbon dioxide equivalent, down 2.3 million tonnes from 2008.

Most of the reduction, 1.8 million tonnes, was in the electricity sector and reflected a switch from a dry year in 2008 to high hydro inflows in 2009, reducing the need to burn fossil fuels in thermal power stations.

Lower emissions from the transport sector due to the downstream effects of the 2008 recession also contributed, the Ministry for the Environment said, as did a drop in the use of nitrogenous fertiliser related to low milk prices in 2009.

Total emissions were 19 per cent higher than in 1990, driven by higher CO2 emissions from road transport and electricity and nitrous oxide emissions from agriculture.

New Zealand's target under the Kyoto Protocol is for average annual emissions in the 2008 to 2012 period to return to 1990 levels.

The Government expects to meet that target, despite the increase in gross emissions, because of the CO2 removed from the atmosphere by forests planted since 1990.

Net removals by forests in 2009 were 17.3 million tonnes, up from 17.1 million tonnes the year before.

The figures showed the emissions trading scheme was working in the forestry sector, Climate Change Minister Nick Smith said.

In a turnaround from the deforestation before then, 1900 hectares of new planting took place in 2008, 4000ha in 2009 and 6000ha in 2010, with projections of 8000ha in 2011 and 10,000ha in 2012, Smith said.

"It is too early to confirm the effect of the ETS on emissions in the energy and industrial sectors as it only took effect on July 1, 2010. I am encouraged by the switch we have seen from investment in thermal generation to renewables and I am confident this will reduce emissions in future reports."

Projections for the full 2008 to 2012 period are that New Zealand's net emissions will better the Kyoto target by 21.9 million tonnes, an improvement on last year's estimate of 11.4 million tonnes. The current carbon price is just over $20 a tonne.

The ministry attributed about a quarter of the improvement to the recession and lower projected growth.

"This surplus has an estimated value of $444 million for New Zealand," Smith said.

"This is not money that goes to the Government, as $1.2 billion of carbon units are allocated to post-1989 forest owners. But it is good news for the Budget in that Government liabilities ... are reduced by $238 million."