Government announces set of improvements to New Zealand’s Emissions Trading Scheme.

December 12, 2018
  • Julie Anne Genter
    Hon Julie Anne Genter

Acting Climate Change Minister Julie Anne Genter today announced the first of two planned tranches of improvements to the New Zealand Emissions Trading Scheme (NZ ETS) following recent public consultation.

These improvements, together with the second tranche of decisions, are expected to be introduced to Parliament next year as amendments to the Climate Change Response Act 2002, which is the legislation that established the ETS.

Acting Minister Julie Anne Genter says the ETS has a vital role to play in the transition to a low-emissions and climate-resilient Aotearoa New Zealand.

“These improvements will create a more effective ETS so it can help us meet our goals to reduce greenhouse gas emissions and plant one billion trees.”

“The most significant improvement is establishing a framework which will enable New Zealand’s emissions under the ETS to be capped in future. This would restrict the number of units supplied into the scheme, increasing the incentive to reduce emissions.

“Up until now, the ETS has been the only emissions trading scheme globally which doesn’t have a cap. The ability to set a cap will help New Zealand meet its international climate change targets, as well as any new domestic targets,” says Acting Minister Genter.

As well as increasing the incentive to reduce emissions, Julie Anne Genter notes that the improvements focus on providing more certainty to scheme participants.

“Submitters to the recent ETS consultation told us that ETS settings needed to be more predictable so participants could confidently take further action to invest in low-emissions activities.

“We’re putting in place a predictable process to manage the cap over time. This will include annual announcements looking forward five years.

“Auctioning will be introduced into the ETS in a way that aligns the supply of units with New Zealand’s emission reduction targets. The cost containment reserve, operated through the auctioning mechanism, will replace the current price ceiling, or fixed price option (FPO), once it is ready.”

The cap will include setting the number of units to be auctioned and the settings for the new cost containment reserve.

Currently, market participants can choose to pay $25 for every tonne of emissions they emit instead of buying units from emissions unit holders.

Julie Anne Genter has made it clear that the improvements do not affect the fixed price option and noted that, “The fixed price option for surrenders due in 2019 will continue to remain at $25 in order to maintain regulatory predictability.”

“We want the ETS reforms to be well-managed and well-signalled and this means keeping the FPO in place while those reforms go through,” she says.

The Government will also investigate the potential introduction of a price floor in the scheme.

“We heard from submitters that having a price floor in the ETS might encourage investment to reduce emissions, so we are going to investigate this option further,” says Ms Genter.

“No decision has been made as to when the ETS will be reopened to international units but, at this stage, they would not be a first choice.

“If, in future, the Government decided to allow international units, we would ensure that the units were of high environmental integrity,” Acting Minister Genter says.

“We’re confident that these changes provide an important balance between predictability for market participants, and flexibility for the Government to manage the ETS so that it supports our emissions reduction targets,” Ms Genter says.

Other key changes being announced today which will improve the effectiveness of the ETS include setting up an infringement offence regime for low-level offending against the ETS rules, and taking steps to improve market governance.

Throughout August and September, the Ministry for the Environment, Ministry for Primary Industries, and Te Uru Rākau (Forestry New Zealand) consulted on proposed improvements to the ETS.

Just over 250 submissions were received from businesses and industry groups, iwi and Māori, community groups and individuals; the majority of which supported the Government’s proposals.

Copies of the submissions can be viewed at http://www.mfe.govt.nz/consultation/ets

Information about the forestry changes planned for the ETS can be found by visiting the Ministry for Primary Industries webpage https://www.mpi.govt.nz/funding-and-programmes/forestry/emissions-trading-scheme/

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Consultation begins on improving New Zealand’s Emissions Trading Scheme

August 14, 2018

The Government has announced that it is consulting on two sets of proposed improvements to the operation of the New Zealand Emissions Trading Scheme (NZ ETS). This email provides an overview of the proposals and where to find further information.

Proposals to improve the ETS framework

We want your feedback on proposals to improve the ETS framework. These include implementing the in-principle decisions made by the previous Government in July 2017. These proposals, found in the first discussion document, are to:

  • establish a process for coordinating and managing unit supply decisions and identifying what factors need to be taken into account when making these decisions (eg, advice from the Climate Change Commission) introduce sealed-bid, single-round auctions with uniform pricing, with an open question on auction frequency. This consultation also seeks views on whether cash obtained from auctioning NZUs should be hypothecated for a specific purpose
  • establish a new price ceiling, in the form of a volume-limited cost containment reserve as part of the auction mechanism, to replace the current fixed price option. The Government is signalling that in the short term there may need to be a change to the current $25 price ceiling. Over the short and long term, the Government is keen to see the ETS deliver a stable, reliable carbon price that is in step with carbon prices in other countries
  • limit the use of international units either through restrictions on government purchase or through limiting the volume of units that are imported/surrendered by NZ ETS participants.

The Government is also consulting now on other issues identified during the review, where in-principle decisions were not made. These include:

 

  • how decisions on phasing down industrial allocation levels are made over time
  • improving the compliance regime by introducing infringement offences for low level non-compliance, and options to change the penalty for failing to surrender or repay units
  • seeking feedback on the risks of market misconduct, in order to inform work on improvements to the market governance of the NZ ETS
  • improving the provision of market information and establishing a dedicated NZ ETS web portal
  • a number of technical operational improvements.

Proposals related to forestry in the ETS

The ETS forestry package proposes changes to reduce complexity and other barriers to forestry owners being part of the scheme. These proposals, found in the second discussion document, include:

  • a new accounting method for forestry New Zealand emissions units (NZUs) allocations and repayment obligations (through options to introduce ‘averaging’ accounting)
  • recognising emissions mitigation from harvested wood products
  • a proposal to create a Permanent Post-1989 forest activity in the ETS
  • proposals for forestry operational improvements in the ETS.

For more information about the proposals and other issues please see:

We will be conducting day-long public information sessions on these proposals in 10 locations around the country from 31 August to 14 September. At these information sessions our team will further explain our proposals and answer questions. We will send you information about these information sessions later this week.

ETS consultation team


New Zealand Emissions Trading Scheme – release of consultation documents at 5.15 pm today 13 August 2018

August 13, 2018

The Ministry for the Environment’s (MfE) New Zealand Emissions Trading Scheme (NZ ETS) team would like to inform you that the Government will be releasing consultation documents on the NZ ETS at 5:15 pm today.

A press statement will be released by Minister Shaw, Minister for Climate Change and Minister Jones, Minister for Forestry, on the Beehive website, and information will be made available on the MfE website.

This email has been sent to you because of requests that information about the NZ ETS is made available to all market participants in a planned and predictable way.

Please note that officials will not be answering any questions ahead of this release. If you have any questions about the process that we are following then please send them to etsconsultation@mfe.govt.nz.

ETS consultation team


New Zealand Emissions Trading Scheme Announcement

July 26, 2017
 

26 July 2017

Kia Ora

The Government has announced a package of decisions that will improve the operation of the New Zealand Emissions Trading Scheme in the 2020s. This email provides an overview of the decisions and where to find further information.
Four decisions to improve the NZ ETS
The Government has made in-principle decisions on a package of four changes to how the NZ ETS will operate in the 2020s. These are to:
• introduce auctioning of units, to align the NZ ETS to our climate change targets
• limit participants’ use of international units when the NZ ETS reopens to international carbon markets
• develop a different price ceiling to eventually replace the current $25 fixed price option
• coordinate decisions on the supply settings in the NZ ETS over a rolling five-year period.
Today’s announcements will not change participants’ interaction with the scheme
There will be no immediate changes to how the NZ ETS operates. The decisions are in-principle, and further work and consultation will be required before they are implemented.
Implementation decisions will be informed by New Zealand’s wider climate change work programme. This includes, for example, work that is underway to determine options for meeting the 2030 target, and the outcome from the Productivity Commission inquiry for transitioning to a lower emissions economy.
Decisions on other issues considered as a part of stage II
Stage II of the NZ ETS also looked at forestry accounting, free allocation, and operational and technical improvements to the NZ ETS. The Ministry for the Environment will report back to Ministers on these issues in the first half of 2018, and organise further stakeholder engagement and consultation to inform this further work.
For more information about the proposals and other issues considered in the review please see
Link to Minister Bennett’s press release: www.beehive.govt.nz/release/new-tools-help-meet-climate-change-targets
Link to the Ministry for the Environment’s web content: www.mfe.govt.nz/nzets/2015-16-review-outcomes
or email NZETSreview@mfe.govt.nz

 


New Zealand ETS sustainable forestry bulletin

November 7, 2016

MPI recently emailed their latest bulletin

This edition has information on:

  • End of the Mandatory Emissions Return period
  • Offsetting pre-1990 forest land
  • Amended forestry sector Regulations
  • Emissions Trading Scheme review update
  • Ratification to the Paris Agreement

Download the Sustainability Forestry Bulletin November 2016


NZU market remains strong Carbonmatch reports

November 7, 2016

Carbon Match recently reported:

Spot NZUs closed the month of October at $18.50 on reasonable volume, then sat still  yesterday, bid at $18.45 and offered at $18.55.

Global climate change talks commence formally in Marrakesh next Monday, just a day before the US Presidential election. 

Overnight, in an uncharacteristic move, the Chinese have openly criticised Donald Trump’s signalled plan to back out of the Paris agreement, with Reuters reporting China’s top climate negotiator as saying that “”If they resist this trend, I don’t think they’ll win the support of their people, and their country’s economic and social progress will also be affected.”

China and the US co-operate strongly on climate change, with the two countries choosing to jointly table their Paris ratification documents earlier this year and sharing technical details on their respective strategies for mid-century, low-greenhouse gas emission development. 

But candidate Trump once tweeted that Climate Change was a concept invented by the Chinese to harm US industry.

It’s not all bad – indeed Trump’s threats might well have contributed to the unprecedented momentum that has underpinned the recent entry into the force of the Paris Agreement.   And that Agreement contains provisions which would impose a four year process on any country seeking to withdraw from the Agreement.

www.carbonmatch.co.nz


NZETS carbon prices rocket

April 14, 2016

Carbon Match is reporting strong interest in NZU above $12NZD http://www.carbonmatch.co.nz

Last week ended on a four year high.  Carbon Match reported:

From bid levels that have sat around the $11.80 level most of the day we have seen buyers reach up again and pay better than the ask on opening, with volume being snapped up to $12.06.

This is a market with a lot of buy-side interest below the surface, but likewise real caution among those on the sell side as would-be sellers hope for a continued rise.

As we wrote earlier in the week, it’s important to temper your expectations with a dispassionate view of the risks, not least of which is that until an announcement has been seen about the 2 for 1, the demand profile of this market remains unknown.

It’s exciting to see this level of prices once again after more than 4 years, but uncertainty is running high and now that today’s willing volume has been cleaned out we are bid $11.85 and offered $12.50.