On Monday 19 November 2012 the Government released a consultation document proposing the restriction of certain international emission units from surrender in the New Zealand Emissions Trading Scheme (NZ ETS), the units being:

  • emission reduction units (ERUs) generated from HFC-23 and N2O industrial gas destruction projects; and
  • certified emission reduction units (CERs) and ERUs generated from large-scale hydropower projects (greater than 20 MW capacity) that do not meet the guidelines in the World Commission on Dams' final report: Dams and Development: A Framework for Decision Making

The Government is proposing to ban these emission units from either 1 January or 1 June 2013 because of concerns over their environmental integrity and a desire to align with the European ETS and future Australian ETS.

Accordingly, any such emission units entering the New Zealand Emissions Unit Registry (NZ EUR) after the determined ban date would not be eligible to be used to meet a participant's surrender obligations. In addition, a participant is likely to be required to provide evidence of when any such banned units entered the NZ EUR (as those entering the NZ EUR prior to the ban date would be eligible for surrender purposes).

The Government is also consulting on whether such units purchased under forward contracts should be eligible for an exemption, such an exemption to be assessed on a case by case basis. When, in December 2011, the Government banned CERs generated from HFC-23 and N2O industrial gas destruction projects, a limited exemption was provided for any such units subsequently acquired under forward contracts that were entered into prior to the ban date if the holders of those contracts registered them with a statutory declaration to the Registrar of the NZEUR by a certain date.

In order to determine how this would work the Government wishes to understand the extent to which there are existing forward contracts to purchase the emission units it proposes to ban and when delivery of units is expected under such forward contracts.

Feedback is being sought on the proposed restriction of units, when this restriction should come into effect, and the application of the restriction to forward contracts.

The consultation document can be found here: http://www.climatechange.govt.nz/consultation/ets/consultation-on-proposed-regs-nzets-units.pdf

The deadline for submissions is 5.00pm on Friday 30 November 2012. Submissions can be emailed to climatechange@mfe.govt.nz