The main thrust of the latest amendments to the
Emissions Trading Scheme (ETS), widely telegraphed in
advance, is to further soften the scheme's implementation to
avoid imposing increased costs on business in the current economic
But some changes also reflect an increasing willingness
by the Government to move away from some of the bedrock principles
of the ETS – doubtless based on the benefit of a couple
of years of experience with an operative scheme.
Most of the bigger changes were signalled in the consultation
earlier this year, though some proposals have been altered. Notably
the Government no longer intends to introduce limits on the number
of international units that can be surrendered.
This will be seen as a controversial decision, as there has been
wide-spread criticism that the unlimited importation of cheap
international units has suppressed domestic carbon prices to levels
unlikely to be effective in changing consumption and investment
Other key developments are:
extending the transition measures, particularly the "one
for two" surrender obligation and fixed price option, with no
end date specified at this stage
deferring the start date for surrender obligations for
agriculture (pending a 2015 review)
allowing pre-1990 forest offsetting, with those who take up the
option needing to return their second tranche of allocation,
providing the power to auction NZUs (within an overall cap of
NZUs auctioned and allocated).
A new pragmatism
A fundamental design feature of the ETS has been to locate the
point of obligation at the importer or producer level, largely for
reasons of administrative practicality, then allowing the carbon
price signal to flow through the supply chain to end-use consumers.
But the Government is now taking a more flexible or pragmatic
approach to this principle.
The latest package of changes includes a new "opt-in"
mechanism for large purchasers of fuel to take responsibility
themselves for the emissions from the fuel they purchase, rather
than having that cost built into the price they pay the fuel
supplier. This option has always been available on jet fuel but is
now being extended to all liquid fuels.
In addition, the Government has signalled that – when
agriculture is brought into the ETS – the point of
obligation will be the farm rather than, as initially proposed, the
An amendment Bill will be released to implement the changes.
There will be the opportunity to make submissions in the normal
select committee process.
The amendment Bill will need to be passed by the end of this
year, otherwise the transitional measures (the "one for
two" surrender obligation and fixed price option) will
Full information on the changes is available
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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The legislation will implement an interim link between the Carbon Pricing Mechanism and the EU Emissions Trading Scheme.
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