The other is that the price incurred by the remaining emissions has been almost zero because the Government decided to allow emitters untrammelled use of imported carbon credits that cost a few cents a tonne - in the process crowding out the New Zealand units (NZUs) it issues mainly to forest owners.
But as of the middle of the year, and until 2020 at least, cheap imported carbon is no longer available to New Zealand emitters.
And now the ETS review proposes, as a priority, to scrap the half-obligation that applies to the likes of oil companies and power companies which burn fossil fuels.
The discussion document estimates that at current carbon prices (around $7 a tonne) and with buy one, get one free in place, the ETS costs the average New Zealand household just over $20 a year - hardly the sort of price signal that will change behaviour.
At a carbon price of $20 a tonne and with buy one, get one free removed, that would rise to $122 a year for electricity and petrol, and $28 if natural gas is used. At $50 carbon it would be just over $300 a year.
Lizzie Chambers, of carbon trading platform Carbon Match, estimates that removing the half-obligation would raise annual demand from fossil fuel emitters, industry and the waste sector from under 20 million tonnes last year to something more like 40 million.
Overhanging the supply side of the market, however, is a surplus of 140 million NZUs.
The Government will continue to issue more NZUs to eligible forest owners and the trade-exposed smokestack sector, but reckons the overhang of NZUs will be whittled down from 140 million to 45 million by 2020. The big uncertainty in trying to figure out how much of that is actually available to the market is how many NZUs forest owners have put in the bottom drawer against the day when they harvest their trees and have to account for the carbon deemed to be emitted.
The majority of the country's emissions will continue to be a charge on taxpayers, as the emissions arising from the bodily functions of livestock (around 48 per cent of the national total) will continue to be exempt from a carbon price and the free allocation of units to emission-intensive, trade-exposed emitters (EITE in the jargon) will continue until at least 2020.
The Government argues that it would be pointless, and internationally unique, to apply a price to agricultural emissions when farmers have no technological options to reduce emissions in response, and it would only put them at a competitive disadvantage to less carbon-efficient producers overseas.
The counter-argument is that there is no reason to treat them differently from other emission-intensive, trade-exposed emitters who face a carbon cost for at least a fraction of their emissions.
In any case, what amounts to a tax break increases the price that it is rational to pay when buying a farm, and the associated debt.
Treasury advice in March, released under the Official Information Act, put the fiscal cost of exempting agriculture through the 2020s at $4.5 billion, though it is not clear what carbon price that assumed.
On the "priority" issue of whether to drop the half-obligation, and if so when, and should the current price cap of $25 be retained, submissions are open until February 19 next year.
Beyond that the review seeks views (by April 30) on a range of other questions:
• Under what conditions should the free allocation of NZUs start to be reduced after 2020?
• Are there opportunities for the ETS to increase incentives for forestry investment, outside of the NZU price?
• If emitters are to be allowed to once again use imported units for compliance in the 2020s, what restrictions would be appropriate?
• Should the Government start auctioning NZUs and if so when, and how should that relate to other sources of supply?
The background to the review is the expectation that the world is at last about to get serious about tackling climate change and that New Zealand will have to move beyond merely pretending to do so.
But there is a problem. At the international level, the offer the Government has tabled for the talks which begin in Paris this weekend - to reduce emissions by 2030 to 11 per cent below 1990 levels, from today's level of about 25 per cent above 1990 - is conditional on New Zealand having "unrestricted access to global carbon markets".
That would allow the country to meet most of its target by importing carbon credits representing emissions reductions somewhere else in the world. It requires their environmental integrity to be sound and safeguards against double-counting.
But at this stage it is far from clear when or where or even whether that condition will be met.
Certainly, an archipelago of national or regional carbon markets is emerging, but all with different rules and giving rise to very different prices.
It is not clear which, if any, New Zealand could or should link to.
And as for a new and improved version of the international carbon markets set up under the Kyoto Protocol and so abused by this country in recent years, it is far from clear where the serious buying side of such a market would come from.
Both the European Union and the US have said they do not intend to use international trading to meet their post-2020 emission targets.
Debate on this article is now closed.
