ETS under review to meet climate targets

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

The Emissions Trading Scheme (ETS) is being reviewed to see if it should be changed to provide stronger incentives for businesses to transition away from fossil fuels.

An outline of why changes are being considered and four proposed options to increase the scale and pace of New Zealand’s gross emissions reductions —  to meet our climate change targets — was released this week for public feedback, which closes on August 11.

The Government has committed to prioritising gross emissions reductions, while also supporting carbon removals.

As the consultation document explains, our climate change targets are “net” emissions reduction targets. This means they include greenhouse gas emissions released (gross emissions) and deduct removals of carbon from the atmosphere from activities such as forestry. (It points out we are one of the only countries which does not limit the number of units from carbon removals that can be used by emitters to pay for their emissions.)

The document says significant new forestry is still needed to meet New Zealand’s domestic and international climate change targets, adding:

“We know there can be environmental, social and economic risks associated with forestry and the Government is committed to achieving the right type, location and scale of forests, for the right purpose.

“These issues are being considered through changes to the National Environmental Standards for Plantation Forestry and the consultation on proposals for redesigning the permanent forest category in the NZ ETS. The NZ ETS review is considering the type and scale of forestry carbon removals driven by the NZ ETS and the impacts of that scale . . . . The Government is (also) considering its response to the (Ministerial Inquiry into Land Use in Tairāwhiti and Wairoa) recommendations.”

Changes to the ETS would have an impact on all New Zealanders, in the short and long term, it says.

“Focusing on reducing emissions now through the NZ ETS rather than removing them through forestry could be more expensive, at least in the short term. These costs are likely to get passed on to households through higher fuel and electricity prices.

“In the long term, New Zealanders will benefit from a low-carbon economy built on efficient, low-carbon technologies. There is some uncertainty whether reducing emissions now or waiting will be more expensive in the long run. He Pou a Rangi Climate Change Commission considers that prioritising emissions reductions would put Aotearoa in a stronger position to meet and sustain net zero, at lower overall costs to New Zealanders.”

An outline of the four proposed options will follow.