A second tranche of proposed improvements to the New Zealand Emissions Trading Scheme (NZ ETS) was released by the Climate Change Minister yesterday. Tranche one was released last December. Both tranches will now form a single Bill to amend the Climate Change Response Act 2002 (CCRA). The latest decisions aim to:
Improve compliance within the NZ ETS by strengthening and redesigning penalties. Notably there will be an automatic penalty three times the current market price for overdue surrender units.
Increase transparency to participants and the public by moving from the present aggregated data to disclosing the sources of emissions and removals.
Prepare for emission unit auctioning by appointing an independent auction monitor via regulations to come. Those future regulations will also provide the detail of the auctioning design.
Allow the current $25 fixed price option price ceiling to transition. While auctioning is scheduled to begin late next year, the ceiling will cease by the earlier of 31 December 2022 or when auctioning actually begins to allow for any delays.
Enable a price floor to be introduced in the future if required to bring confidence to low-emission investments such as forestry.
Establish a market governance work programme to find an appropriate market regulator and consider issues such as insider trading and market manipulation.
Further decisions on industrial allocation as well as the new CCRA Amendment Bill are expected later this year. Additional information is available on the Ministry for the Environment website here.