The proposals in this document seek to improve the New Zealand Emissions Trading Scheme.
The New Zealand Emissions Trading Scheme (NZ ETS) was established in 2008 to support New Zealand to meet its international climate change targets and reduce greenhouse gas emissions below business-as-usual levels. It does so by putting a price on greenhouse gas emissions and removals.
The Government seeks feedback on a range of proposals to improve the NZ ETS. The proposals are outlined briefly in the summary and in further detail in subsequent chapters of this discussion document.
The proposals respond to the findings of the 2015/16 NZ ETS review. The review, which concluded in mid-2017 identified several problems with the scheme. It identified the Government does not have the tools to effectively manage the supply of units into the market, that there is significant regulatory uncertainty for participants and technical and operational features need improvement.
The proposals aim to make the scheme fit-for-purpose to help New Zealand deliver on its emissions reduction targets. The proposals focus primarily on the framework of the NZ ETS so the scheme provides more predictability for market participants and gives the Government flexibility to make well-signalled adjustments in response to changing circumstances.
The Government has also released a separate discussion document with proposals for improvements to forestry in the NZ ETS. Forestry is an important source of abatement for New Zealand and how it transitions to a net zero emissions economy. The forestry proposals aim to improve NZ ETS incentives for new forest planting, including permanent forests.
This discussion document does not consider the role of agriculture in the NZ ETS. The Climate Change Commission is expected to consider whether and how agricultural emissions should enter the scheme.