ETS reforms will give business certainty — Shaw
The Government has announced a raft of fresh reforms to one of New Zealand’s key policy levers to fight climate change.
Changes to the Emissions Trading Scheme (ETS) will set a new cap of 160 million tonnes of CO2-equivalent greenhouse gases over 2021 to 2025, along with a provisional emission budget for the same period of 354 million tonnes.
The ETS works by requiring companies in the scheme to match each unit of emissions they report with an allowance, or credits, they must pay to the Government.
People who plant forests, meanwhile, can report the carbon dioxide they take out of the air and claim credits, which they can sell, thus creating a trading market and an
The ETS has been a cap-and-trade scheme without a cap, meaning the emissions permitted under the scheme were, in effect, unlimited. James Shaw, Climate Change Minister
incentive to lower emissions.
Other changes include price controls that will act as a backstop to auctioning, designed to stop prices going too low or too high.
The Government will also extend participants’ access to the fixed price option — which acts as the scheme’s de-facto price ceiling — to cover 2020 emissions.
At the same time, however, the Government has opted to push back implementing major forestry policies to 2023, and delay bringing in penalties for smaller foresters.
The changes — included in the Emissions Trading Reform Bill, which has its second reading in Parliament today — follow a series of tweaks to the ETS, such as the inclusion of permanent forests in the scheme.
The ETS has been widely criticised for reforms that allowed users to import so-called “hot air” credits of dubious integrity — something which coincided with a resumption of deforestation — before overseas credits were eventually banned.
Climate Change Minister James Shaw said the announced reforms would give businesses and foresters the certainty they’d been asking for.
He said rules set by previous governments had left the scheme too weak to have any real impact on reducing our emissions.
“A good example is the fact that until now the ETS has been a capand-trade scheme without a cap, meaning the emissions permitted under the scheme were, in effect, unlimited,” he said.
Shaw said an ideal scheme allowed a wide range between the floor and ceiling prices, to allow for market movement. Meanwhile, Shaw has asked the recently formed Climate Change Commission to provide advice on whether the commitments New Zealand made under the Paris Agreement are ambitious enough to meet the United Nations’ aspirational target of limiting warming to 1.5C above pre-industrial levels.
Those pledged to slash New Zealand’s emissions by 30 per cent below 2005 levels, and 11 per cent below 1990 levels, by 2030. Shaw said he was critical of the pledges when they were being developed by the previous National-led government in 2015, considering them too weak, so he wanted a fresh look.