The Ministry for the Environment (MFE) is currently consulting on a suite of proposed amendments to the Emissions Trading Scheme (ETS); New Zealand's principal policy response to climate change.

There are two sets of proposed amendments that seek to improve the ETS. The first set proposes to strengthen the ETS to help New Zealand meet its climate change targets (including the Paris Agreement commitment to reduce greenhouse gas emissions by 30 per cent below 2005 levels by 2030). The second set of amendments seek to reduce complexity and other barriers to forest owners participating in the ETS.

A decision about whether agriculture will be included in the ETS is not part of this consultation, and decisions on this issue will be made next year.

Amendments to strengthen the ETS include:

  • Introducing an annual process for setting and announcing ETS unit supply volumes over a five-year rolling period. This will set an overall limit (i.e. a cap) on the number of units supplied into the ETS market and allow this limit to be managed over time.
  • Auctioning New Zealand Units (NZUs) using a single round, sealed bid, uniform price auction format. The Government is interested in hearing stakeholders' opinions on the possibility of a change to the $25 fixed price option for emissions units. Feedback is also sought on whether auction proceeds should be earmarked for a specific purpose.
  • Introducing a set of strict liability infringement offences for lower-level non-compliance.

In the future, there are two modes through which international units could be made available to ETS participants. This could occur directly (through market participants purchasing, trading and surrendering international units themselves) and/or indirectly (via the Government purchasing international emission reductions and auctioning NZUs). The Government is seeking feedback on what impacts the different modes might have on participants and the ETS market.

The Government also seeks feedback on whether individual participant emissions data and compliance information should be publicly available.

Amendments to reduce complexity and other barriers to forest owners' participation:

  • Changing how forests earn and repay carbon credits in the ETS.
  • Introducing a mechanism for recognising emissions mitigation from harvested wood products.
  • Creating a new permanent forest activity in the ETS.
  • Introducing a package of operational changes to improve the way the ETS works for forestry participants.

Consultation on unit supply volumes and the technical details of the ETS (e.g. operational rules for auctioning) is expected to follow the final policy decisions on the Zero Carbon Bill (including decisions on the 2050 emissions target and role of the independent Climate Change Commission). These details are expected to be provided through supplementary regulations in 2019.

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