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9 Approach to Legislation for the Emissions Trading Scheme

This chapter explains what the legislative basis for an ETS would involve. The legislative mandate for a NZ ETS would be established through amendment to the Climate Change Response Act 2002, and the NZ ETS would be further developed over time through amendment and regulation processes.

9.1 An amendment to the Climate Change Response Act 2002

It is proposed that the NZ ETS be provided for in primary legislation as an amendment bill that inserts a new part or parts into the Climate Change Response Act 2002 (CCRA). The CCRA implements New Zealand’s obligations under the Kyoto Protocol, including the establishment of a national emission unit registry and a national inventory of greenhouse gas emissions. Some of the features needed for the ETS already exist under the CCRA (although they will require modification). Therefore, the proposed amendment may also need to involve amending existing sections of the CCRA.

The benefits of having a number of climate change matters that require legislation grouped in one Act include:

  • ease of access to the legislation for the public who use it (one “code”)
  • existing synergies with the CCRA and the ETS (eg, the potential use of the registry).

The purpose of the CCRA is focused on New Zealand implementing its Kyoto Protocol obligations into domestic law. The ETS is being designed not only to meet Kyoto obligations but to operate beyond Kyoto and to be able to work in the post-2012 period if there is no further Kyoto commitment period. The purpose of the CCRA would therefore have to be amended to reflect the objectives of an ETS.

The parliamentary process at the select committee stage provides for any member of the public to submit on the bill and have their submission heard by the committee. This gives an opportunity for further information to be gathered from stakeholders with regard to their views on the how the ETS legislation will work and any refinements made to the bill.

9.2 Overall structure and development: regulations and further amendments to the CCRA

It is proposed that the ETS legislation will address the core design elements required for any ETS (as detailed in chapter 4). The ETS legislation (amendment bill to the CCRA) may not initially present the full detail of the scheme for every sector.

The intention is for the ETS legislation to present the substantive provisions relating to the general obligations of participants and core design elements (including the consequences of non-compliance with those obligations). It will provide more specific provisions governing the entrance of the first sectors into the scheme (eg, forestry and liquid fossil fuels). Where possible, it will also contain provisions to guide the entrance of subsequent sectors, accepting that more detailed design features must be subject to ongoing engagement.

Over time, further amendments may be required to the CCRA to support an ETS, such as sector-specific provisions for those sectors entering the ETS in later stages. To ensure effective implementation, regulations will be needed for some aspects of the ETS and to support the legislation. Some regulations may need to come into force at the same time as the ETS legislation. The regulation-making process for those regulations will therefore need to occur alongside the bill for the ETS going through Parliament.

There may also need to be further ETS regulations over time as details for various sectors involved in the scheme are implemented.