Govt backtrack on ETS settings

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

Opinion

The Government has moved this week to restore confidence in the country’s carbon market and Emissions Trading Scheme, announcing changes to ETS settings so they will align with advice provided by the Climate Change Commission in July last year.

The Government rejected that advice late last year, due to cost-of-living concerns. As the ANZ noted in a research report this week, that made the market question how committed it was to reducing emissions to the levels to which New Zealand had previously committed. “Subsequently the price of carbon in the secondary market started to trend down and no units were purchased in the two quarterly auctions held this year to date.”

The carbon price was at $86 per NZ Unit (NZU) on December 16 when media covered the Government’s decision; it crashed below $40 earlier this month — before a High Court order on July 14 that the Government reconsider the ETS unit limit and price control settings. During the High Court action, the Climate Change Minister admitted the adopted settings did not align with our global commitments nor our emissions reductions budgets.

Yesterday NZUs traded at $65.

Key changes announced on Tuesday are a lift in the minimum auction price for NZUs from $33 to $60 in December, 2023; a substantial lift in the prices required to trigger the release of extra units; and the volume of NZUs on offer over 2023-2028 has been reduced by 17.6 million units.

The announcement this week is separate to the ETS review which is now in a consultation phase through to August 11. The review focuses on the structure of the market, with one option under consideration being to limit the use of credits from forestry removals by emitters, which would effectively result in a two-tiered market for carbon credits.

■  Some commentary has appeared lately claiming the Intergovernmental Panel on Climate Change has revised down its assessment of the impact of ruminant methane by a factor of three to four times — including in a book review in this newspaper two weeks ago, and in a column in the NZ Herald yesterday that bemoaned the lack of media headlines expressing relief from the wider community or any political party. The reference given for this misinformation, first claimed by former politician Barry Brill last month, is a discussion of different metrics for comparing short-lived and long-lived gases in the IPCC’s 2021 Sixth Assessment Report; it is an important discussion that could potentially lead to a significant change in New Zealand’s emissions profile and the now almost 50 percent contribution of farming, but for the time being GPW100 remains the globally accepted metric for comparing different greenhouse gases.