ETS report shows scheme working well

The first annual report of the New Zealand Emissions Trading Scheme shows it is working well, emissions are being reduced and it is driving new investment in forestry and renewable electricity, Climate Change Minister Nick Smith says.

"This report shows the ETS is working as intended, that the implementation has gone smoothly, and that New Zealand is now on target to meet its Kyoto obligations," Dr Smith said.

"The real success of the ETS is how it is influencing investment decisions. The record 40,000 hectares of deforestation between 2005 and 2008 has been reversed with increases in afforestation every year since the ETS has been in place. New Zealand's forest area grew by 4700 hectares in 2010 and is projected to increase by 5700 hectares in 2011 and 7700 hectares in 2012.

"The price incentives of the ETS helped renewable electricity hit a 12-year high of 79% in 2010. Eleven new renewable power stations totalling 1340 MW of capacity have been consented in the past year - 59% wind, 26% geothermal, 13% hydro, 2% tidal. This is an all time high, is five times the annual average of the past decade, and contrasts with most new capacity over the last decade being fossil fuelled.

"The report shows 98% of emitters used forestry and other New Zealand units to meet their ETS obligations, with very few using overseas units or the fixed price option. This dispels concerns New Zealanders through the ETS would be paying money overseas and the fixed price option would excessively distort the market.

"The report shows actual allocations to trade exposed businesses was 1.76 million tonnes, 25% less than forecast. The number of businesses eligible for support was nearly 300 - three times greater than forecast. This reflects a large number of smaller businesses, principally export horticulturists, being eligible for support but for relatively small amounts. The lower overall levels of allocations reflect a smaller number of big industries meeting the 1% or 2% cost of turnover test for support. "It is encouraging that New Zealand's net emissions are down for two consecutive years after a 23% increase between 2000 and 2008. We are on target to comfortably meet our Kyoto target with a projected 21.9 million tonne surplus. Without the ETS we would be exceeding our target by 19.5 million units and face international costs of $485 million.

"The Government is giving careful consideration to future decisions on the ETS. The issue is how quickly we progress the scheme. The Government's decisions will reflect our underlying approach of New Zealand doing its fair share relative to other countries on climate change and being mindful of the cost impacts on households and businesses.

"The Government has received the report of the ETS Review Panel but I have asked that it update its report relative to the recent announcements in Australia on carbon pricing. I expect to announce the outcome of the review and the future direction of the scheme next month."

The Ministry for the Environment report on the NZ ETS is available at: http://www.climatechange.govt.nz/emissions-trading-scheme/building/reports/ets-report/index.html

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