Legislative changes to the New Zealand Emissions Trading Scheme - 2012

This page outlines the legislative changes made in 2012 to maintain the costs that the NZ ETS places on the economy at current levels and improve the operation of the New Zealand Emissions Trading Scheme.

The purpose of the Climate Change Response (Emissions Trading and Other Matters) Amendment Act 2012 is to maintain the costs that the ETS places on the economy at current levels. This will ensure businesses and households do not face additional costs during the continued economic recovery; and that New Zealand continues to do its fair share on climate change.

The changes also make a number of important changes designed to improve the operation of the ETS, providing more flexibility for forest landowners and ensuring the scheme is 'fit for purpose' after 2012.

The key changes are:

  • to extend transitional measures designed to reduce the cost impacts of the scheme beyond 2012.
    • In particular, these will extend the ability of many of those with NZ ETS obligations to surrender one emissions unit for every two tonnes of emissions (the 'one for two'). In addition, participants will also have the choice to meet their obligations by paying the Government $25 per tonne of emissions (the fixed price option)
  • to remove the start date for surrender obligations for biological emissions from agriculture
    • The Government has indicated biological emissions from agriculture will only incur surrender obligations if there are technologies available to reduce these emissions and our international competitors are taking sufficient action on their emissions. Agricultural producers are still required to report on their emissions, which they have been doing since the beginning of this year
  • to introduce 'offsetting' as an option for pre-1990 forests, giving forest landowners the flexibility to convert their land to a better use, but avoid ETS deforestation costs by planting a carbon equivalent area of forest elsewhere
  • pre-1990 landowners will continue to receive their allocation of emissions units in full.
    • In recognition of the benefits offered by offsetting, pre-1990 forest landowners who take up offsetting will need to surrender the value of the second tranche of the allocation for the land being offset
  • to introduce a power to allow the Government to sell NZUs (the primary emissions unit used within the NZ ETS) by auction, within an overall cap on the number of NZUs auctioned and allocated.
    • This will help to ensure ETS participants do not need to fund more emissions reductions in other countries than New Zealand needs to in order to meet its international obligations or domestic targets. The Government is currently assessing possible high-level auctioning design features to potentially develop an auctioning function under the NZ ETS. More information on auctioning will be provided as this work progresses.
  • to change the ETS treatment of the synthetic greenhouse gas (SGG) sector through a number of changes, such as introducing the SGG levy.
    • This will significantly reduce administrative and compliance costs for the sector

The Climate Change Response (Emissions Trading and Other Matters) Amendment Act 2012 also introduced a number of smaller, more technical changes to improve the operation of the ETS.