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Latest ETS reforms target transparency and compliance

The second set of improvements to the New Zealand Emissions Trading Scheme (NZ ETS) have been announced to further encourage greenhouse gas emissions reductions and increase forestry planting, said the Minister for Climate Change.

These latest changes will:

• improve transparency within the NZ ETS,

• increase rates of compliance with the scheme,

• pave the way for robust NZ ETS auctions,

• ensure that the fixed price option is removed no later than the end of 2022,

• enable a price floor to be added to the NZ ETS if necessary in future.

From 2021, changes designed to increase transparency of the NZ ETS will let the public access more information about the scheme, including the emissions of individual NZ ETS participants.

“It’s critical for public trust in the NZ ETS that information is readily available,” James Shaw said.

“It’s also crucial that participants comply with their obligations”.

NZ ETS compliance rates are expected to increase as a result of planned changes to the existing penalty regime which will see penalties separated into two categories; one related to reporting compliance and the other related to surrender/repayment obligations.

NZ ETS auctions, which are planned to begin in late 2020, will also be strengthened by these changes.

“We have enabled the appointment of an auction monitor to independently oversee NZ ETS auctions. An auction monitor will minimise anti-competitive behaviour and promote fair access to auctions,” said Mr Shaw.



Under the latest changes the current $25 fixed price option price ceiling (FPO) will be removed when auctioning begins, or no later than 31 December 2022.

“This ensures that the FPO will be removed while also allowing for any unexpected events, such as a delay to the introduction of auctioning,” Mr Shaw said.

As previously announced, the FPO will retain its current $25 level for surrenders due in 2019 in order to support ongoing regulatory predictability.

“It’s not out of the question that a price floor might be introduced in future,” Mr Shaw said.

“Submitters called for a price floor so their confidence in the NZ ETS would increase. We will enable a price floor if it’s necessary in future to protect against unacceptably low prices.

Both sets of improvements to the NZ ETS; along with further decisions expected over the coming months on industrial allocation, will form a single bill to amend the Climate Change Response Act 2002.

Parliament will consider this bill alongside the Climate Change Response (Zero Carbon) Amendment Bill, which was introduced to Parliament last week and is expected to pass into law at the end of this year. Both bills will support New Zealand’s aim of reducing greenhouse gas emissions to levels that help limit global warming to 1.5o Celsius above pre-industrial level.

The public will have an opportunity to provide feedback on the Bill when it is referred to select committee.

The Government also plans to consult, in due, course on regulations for auctioning and NZ ETS settings (including supply volumes and price ceiling levels), amongst other topics.

In addition, the Government is considering its response to recommendations from the Interim Climate Change Committee on setting up a system to reduce agricultural emissions and transitioning to 100 per cent renewable electricity by 2035.

Proposals to introduce a broader market governance framework for the NZ ETS will be developed over a longer time-frame and will not form part of the amendment bill to be introduced later this year.

“It is worth taking more time to develop a market governance framework for the NZ ETS that is comprehensive and coherent, and to ensure the impacts of any proposals on market participants are fully understood,” James Shaw said.


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