ETS review now underway

The Government has begun its review of the New Zealand Emissions Trading Scheme (ETS).

A discussion document has been released and submissions are due on the future of the transition measures by 19 February 2016.

The submission deadline for the remaining ETS design features is 30 April 2016.

Preparing for a more carbon-constrained future?

A key objective of the review is to prepare the New Zealand economy in the context of a strengthening international response to climate change and potentially higher carbon prices in the 2020s.

The international community is meeting in Paris from 30 November to 11 December with an ambitious goal of a new universal post-2020 agreement that will keep global warming below 2°C.

New Zealand has proposed an "Intended Nationally Determined Contribution" of reducing greenhouse gas emissions to 30% below 2005 levels by 2030.

The ETS review discussion document signals the need for a tightening of the ETS screws in order to meet New Zealand's international obligations and reduce net emissions below business as usual.

Transitional provisions

The transitional measures include:

• a one for two surrender subsidy on emissions

• a price cap of $25 per unit, and

• exclusion from the surrender obligations of the scheme for the agricultural sector.

Climate Change Issues Minister Tim Groser has confirmed that agriculture will be outside the scope of the review.

The priority consultation issues relate to whether the one-for-two surrender subsidy should be removed (and if so, when), and how the costs of moving to full surrender obligations should be managed.

Other areas

The review will also investigate:

• how the design of the ETS needs to evolve, and

• operational and technical improvements.

Key design issues being consulted on include the future of free allocation and how the supply of units should be managed (including access to international units, the role of auctioning, and measures to manage price stability such as a 'price floor').

The discussion document acknowledges that the ETS alone will not drive New Zealand towards a low emissions economy and is also seeking feedback on barriers to the efficient uptake of low emission or no emission technologies.

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