Climate Change Issues Minister, Hon Tim Groser, has introduced the anticipated Climate Change (Emissions Trading and Other Matters) Amendment Bill 2012.
As expected, the Bill proposes the following amendments:
- Keeping the 'two-for-one' (or 'half price') transition obligation in place (with no specified end date), so that ETS participants with emissions obligations are only required to surrender 1 NZU for every 2 tonnes of carbon dioxide-equivalent emissions;
- Maintaining the $25 fixed price for NZUs purchased from the Government indefinitely (in order to protect ETS participants if the international carbon price rises sharply over the next few years);
- Suspension of the phase-out of industrial allocation of NZUs indefinitely (which was set to begin next year), associated with the continued ban on exporting of NZUs overseas (except for those NZUs created within the forestry sector);
- Introducing an express regulation-making power to allow the auctioning of NZUs (within an overall cap on the number of NZUs auctioned and allocated);
- Removing the requirement to “back” all NZUs issued with a Kyoto unit (to allow for auctioning);
- Introducing off-setting for pre-1990 forestry land owners from 2013 (allowing them to change their core land use away from forestry without paying emissions penalties, and requiring them to off-set their forestry planting in an alternative location);
- Allocating the planned full second tranche of compensation/NZUs to pre-1990 forestry land owners where off-setting is not taken up; and
- Leaving agricultural biological emissions out of the ETS indefinitely (with a review on this position to be carried out in 2015).
- Aligning the ETS with international greenhouse gas accounting standards by adopting the latest internationally accepted global warming potentials;
- Removing the ETS obligation on the importation of synthetic greenhouse gases (SGGs) in motor vehicles and goods, and introducing new mechanisms instead (see further details on SGGs here).
The Bill has passed its first reading, and has been referred to the Finance and Expenditure select committee, with report back to the House set for Wednesday 17 October 2012. Submissions must be made before Monday 10 September 2012.
The select committee process is shorter than usual (leaving the public only 2 weeks to make submissions), but is necessary in order to ensure that the Bill is passed before the 31 December deadline when the current 'slow down' transition period is due to end. During this transition period, ETS participants (except for those in the forestry sector) have only had to submit half the number of required New Zealand Units (NZUs) to cover their greenhouse gas emissions. This reduced obligation framework is set to continue indefinitely if the proposed amendments are passed.
The Government has already received 370 submissions during consultation on proposed amendments to the Emissions Trading Scheme earlier this year (consultation closed in early May 2012), and subsequent meetings have been ongoing with interested parties. Opposition members have been critical about the shortened time frame for submissions, saying that the select committee will not have the necessary time to hear all submissions, and then receive advice and draft its report within the overall 7 week period.
The Government will be consulting with stakeholders separately on the detailed auction design features in respect of the proposed increase of NZU supply via auction. Consultation is also expected to take place in respect of forestry offsetting technical details. This consultation is expected to occur in the next few months.