New Zealand to Revise Emissions Trading Scheme

September 16, 2009

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New Zealand will revise its Emissions Trading Scheme (ETS) to lower the costs to households and to reduce the impact on jobs, while ensuring a responsible approach to greenhouse gas pollution and climate change, according to the Minister for Climate Change Issues.

The current National-led government suspended the previous administration’s scheme and launched a review after coming to power following a general election last year.

“New Zealand needs an emissions trading scheme to discourage carbon pollution, improve energy efficiency and reward afforestation,” said Minister for Climate Change Issues Nick Smith in a press release.

The revisions are supported by the Maori Party, which raised concerns about the ETS impact on low-income households and primary industries such as fishing, forestry and agriculture. Gaining the support of the Maori Party now gives National the numbers to pass the new legislation in parliament, reports Reuters.

The revised scheme includes the following changes:

Revised entry dates of July 1, 2010, for transport, energy and industrial sectors and January 1, 2015, for agriculture
A transitional phase until January 1, 2013, with a 50 percent obligation and NZ$25 ($17.65) fixed price option for the transport, energy and industrial sectors
A production-based industry average approach to allocations for trade exposed, emissions intensive businesses
Incentives for afforestation created by a domestic and international market for carbon credits
Enhanced transitional support for the fishing industry

Smith expects these change will cut the price impact on households in half for fuel and electricity and that the fixed price option will provide stability to enable carbon markets to mature. He also said the government will introduce a Climate Change bill next week to Parliament that implements these changes.

New Zealand hopes to have a revised law passed before the Copenhagen climate change conference in December.

Smith said the scheme was being closely aligned with Australia’s proposed carbon pollution reduction scheme, reports Reuters.

Business and industry groups told Reuters that the revised scheme is more balanced, meeting the needs of most sectors of the economy.

The big winners under the revision are industry and farming, which will benefit from delayed phase-ins and more government assistance in meeting their Kyoto Protocol obligations, reports The Press. Consumers will also gain with additional household electricity and oil costs cut in half to about NZ$165 ($116.43) a year, reports the newspaper.

In the biggest change to the existing ETS, the government will offer liquid fossil fuels and industrial processes a “two for one” deal until 2013, which means sectors have to surrender only one carbon unit for every two units of emissions they make, according to The Press.

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