13 Apr 2023

Climate Change Commission tells govt change emissions scheme or risk targets failure

10:07 pm on 13 April 2023
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The Commission today released new advice, much of the analysis similar to what it gave the Government last year. Photo: RNZ / Dom Thomas

The Climate Change Commission has told the Government to change the Emissions Trading Scheme or risk failing to meet climate goals.

The scheme is a market where the Government sets a price for damaging greenhouse that polluters have to pay for by the unit to emit.

It is one of the main tools to reduce emissions, with prices rising over time incentivising firms to innovate and pollute less.

But late last year Cabinet rejected the Climate Commission's advice to change settings to let the price go up, citing the cost of living crisis.

That caused the carbon price to plummet, last month the ETS auction failed as buyers did not bid high enough to trigger the release of units.

Previously the units had in demand, and is considered a sign the market is unsure the Government is serious about its plans to cut emissions.

The Commission today released new advice, much of the analysis similar to what it gave the Government last year.

Read the advice [https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/nz-ets/our-advice-on-the-nz-ets/nz-ets-unit-limits-and-price-control-settings-2024-2028


It advises to change settings to allow the carbon price to rise, saying the Government should tackle the increasing cost of living with other policies and measures.

It said the current settings are at risk of being out of step with the our emissions reduction plans and targets, and our international pledges.

The advice states that in an emissions trading scheme it is not possible to keep tight control of prices and stay in line with an emissions reduction target.

"If the Government chooses to accept the Commission's recommendations for NZ ETS settings, then it will enable the ETS to do the job it was set up to do," Commission chair Dr Rod Carr said.

"If the Government declines the recommendations, then it will need a much stronger policy approach to achieve emissions budgets than the one outlined in the emissions reduction plan."

In the meantime the New Zealand Herald reports the Government's books have taken a hit to the tune of nearly half a billion dollars because of low carbon price.

The advice released today will not impact ETS settings before 2026.

Compared to current settings, the Commission's advice today recommends:

    [il] Reducing the limit on the number of units available for auction

    [il]Raising the trigger prices for the cost containment reserve and auction reserve price

    [il]Changing to a two-tier cost containment reserve.

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