Government announces set of improvements to NZ’s Emissions Trading Scheme

Acting Climate Change Minister Julie Anne Genter has 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.

The improvements will create a more effective ETS to help meet the Government’s goals to reduce greenhouse gas emissions and plant one billion trees, Ms Genter said.

The most significant improvement is establishing a framework which will enable New Zealand’s emissions under the ETS to be capped. 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.

The improvements also focus on providing more certainty to scheme participants.

Submitters to the recent ETS consultation told the Government that ETS settings needed to be more predictable so participants could confidently take further action to invest in low-emissions activities, Ms Genter said.

A predictable process to manage the cap over time will include annual announcements looking forward five years.

And 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).

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.

The fixed price option for surrenders due in 2019 will continue to remain at $25 “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,” Ms Genter 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. 

“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.”

Other key changes 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 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 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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EPA welcomes Productivity Commission’s draft report on shifting to a low-emissions economy

The Environmental Protection Authority, which administers this country’s Emissions Trading Scheme, has welcomed the Productivity Commission’s draft report on how New Zealand can reduce its domestic greenhouse gas emissions through a transition to a low-emissions economy while at the same time continuing to grow income and wellbeing.

The report makes 140 findings, 50 recommendations and asks 11 questions.

Some 10 days after its release, EPA chief executive Dr Allan Freeth has issued a statement to say the report calls for a shared, long-term vision on what must be done.

The EPA’s submission on the report last year highlighted three mains points to a vision for a low-emissions economy – new thinking around New Zealand’s climate change approach, more cross-government collaboration, and the incorporation of operational perspectives in decision-making early.

“With multiple agencies and parties working on climate change, there are many opportunities to reset our thinking, and drive new and more efficient behaviours throughout New Zealand,” Dr Freeth said.

“The EPA is well positioned to support the national response to climate change.”

The authority administers the Emissions Trading Scheme and the NZ Emissions Trading Register (see HERE), which holds around $2.6 billion worth of privately held assets.

“When you consider the value of these assets some of these entities hold in the NZ Emissions Trading Register, it’s important we deliver efficiencies and have a secure and robust system,” Dr Freeth said.

“Our ETS team is on the ground, actively engaging with all entities who play a part in climate change.”

The New Zealand Emissions Trading Register has been upgraded to better support current functions and have more flexibility for future needs, like the introduction of auctioning into the ETS, Dr Freeth said.

“We are already looking at how to improve our operations for the EPA and the customers, exploring new ways to deliver carbon market information, and testing new ways to get the best out of compliance and enforcement tools.

“New Zealand has also made a good start on addressing ozone-depleting substances under the Montreal convention.

“Our scientific work to review and approve hazardous substances and new organism applications, will continue to be important as leading-edge science continues to deliver new approaches which may result in lower emissions.

“We are also exploring things like mapping New Zealand’s chemical loading, which will help build comprehensive data of where hazardous substances are stored, like fertilisers, which could possibly support work on agricultural emissions.”

Describing the EPA as New Zealand’s proactive environmental regulator, Dr Freeth said it is always looking at how to better use its experience and strong track record of using evidence, science, and mātauranga Māori to inform decision-making processes.

The Productivity Commission’s draft report says moving to a low-emissions economy will require:

  • getting emissions pricing right, to send the right signals for investment;
  • harnessing the full potential of innovation and supporting investment in low-emissions activities and technologies;
  • creating laws and institutions that endure over time and act as a commitment device for future governments; and
  • ensuring other supportive regulations and policies are in place (including to encourage an inclusive transition).

Submissions which will contribute to the next stage of the inquiry can be made here by 8 June. 

A final report will be presented to the Government in August.

Government announces Interim Climate Change Committee

The Minister for Climate Change, James Shaw, has announced the membership of the Interim Climate Change Committee, which will begin work on how New Zealand transitions to a net zero emissions economy by 2050.

Work must start now on how sectors like agriculture might enter into the New Zealand Emissions Trading Scheme (NZETS), he said.

And planning must begin now for the transition to 100 per cent renewable electricity generation by 2035.

The Interim Climate Change Committee will undertake this work until the independent Climate Change Commission is established under the Zero Carbon Act in May next year.

The Interim Committee will consult with stakeholders and hand over its work and analysis to the commission, he said.

Mr Shaw said committee members have been chosen because of their expertise across key areas related to climate change: agriculture, agribusiness, climate change science and policy, resource economics and impacts, Te Tiriti o Waitangi, te reo me ona tikanga Māori and Māori interests, international competitiveness, and energy production and supply.

Dr David Prentice, the Interim Committee Chair, was most recently the managing director of infrastructure firm Opus International Consultants.

He led his company through the Global Financial Crisis and has a sound understanding of economics and international markets.

Lisa Tumahai, the Deputy Chair, has significant governance experience and is Kaiwhakahaere of Te Rūnanga o Ngāi Tahu. She is a person of significant mana and standing in the Māori community.

The other committee members are:

  • Dr Harry Clark, a New Zealand expert on agricultural greenhouse gas research;
  • Dr Keith Turner, former CEO of Meridian and professional director;
  • Dr Jan Wright, former Parliamentary Commissioner for the Environment;
  • Dr Suzi Kerr, an internationally renowned expert in the economics of climate change policy and emissions trading.

Source: Minister for Climate Change

 

Blogger gets heated about Groser’s remarks on farming, climate change and the ETS

Gareth Renowden, a writer, photographer and truffle grower based in the Waipara Valley, has challenged remarks by Climate Change Minister Tim Groser about agriculture and the Emissions Trading Scheme.

Renowden publishes the influential Hot Topic blog, covering climate change science and politics in New Zealand.

He has taken issue with remarks by Groser at the National Agricultural Fieldays earlier this month.

Groser claimed that including agriculture in the emissions trading scheme would be madness.

Any attempt to deliberately price carbon to reduce our agriculture output to make some ideological point would not only be an economic mistake of grave proportions, it would worsen the problem of global anthropogenic-induced greenhouse gas warming since the production gap would be filled by less carbon efficient producers than ours. Utter environmental and economic madness, in my view.

But at The Daily Blog today, Renowden argues that Groser is talking utter nonsense, and agriculture needs to be included in the Emissions Trading Scheme as soon as possible.

You can see what he is arguing here. He has called for comments at The Daily Blog.