Parliament's Environment Committee has reported on the Climate Change Response (Emissions Trading Reform) Amendment Bill.

Extract from the report:

The Environment Committee has examined the Climate Change Response (Emissions Trading Reform) Amendment Bill and Supplementary Order Paper No 413. The committee recommends (by majority) that the bill be passed with the amendments shown.

The New Zealand Emissions Trading Scheme (NZ ETS) was established in 2008, through amendments to the Climate Change Response Act 2002. This bill and supplementary order paper (SOP) would reform the NZ ETS by further amending the Climate Change Response Act.

The bill and SOP would:

• update the purpose of the Climate Change Response Act to include the Paris Agreement, and remove redundant references to the Kyoto Protocol
• enable a cap to be placed on emissions covered by the NZ ETS
• provide for a cost containment reserve, rather than a fixed price option, to allow the Government to manage the supply of units in the NZ ETS
• improve the process for the auctioning of units in the NZ ETS
• allow for the phase-down of industrial allocation from 2021, with greater reductions from 2030
• strengthen the compliance regime by introducing new infringement offences for low-level offending, restructuring the excess emissions penalty system, and making information about significant non-compliance publicly available
• make more data publicly available about the emissions and removals of individual businesses
• make a number of operational and technical improvements to the NZ ETS, particularly in the way it relates to forests
• introduce averaging accounting to the NZ ETS for post-1989 forests
• introduce a new “permanent forestry” activity into the NZ ETS, and disestablish the existing
• Permanent Forest Sink Initiative (PFSI) from the Forests Act 1949
• give effect to decisions to price agricultural livestock emissions at farm level, and fertiliser emissions at processor level, from 2025, and provide a fall-back option if there is insufficient progress on an alternative pricing mechanism by 2022.

Proposed amendments

This commentary covers the main amendments we recommend (by majority) to the bill as introduced. They include:

• introducing activity-specific reduction of the general phase-out rate enabling more data collection
• improving options for the backing of units
• taking into consideration future emissions budgets and targets
• clarifying the membership of the Climate Change Commission, and its reporting on industrial allocation
• introducing advance notice of publication of emissions data
• providing the possibility of voluntary reporting for agriculture before reporting became mandatory
• providing the possibility of voluntary participation for farm-level agriculture
• changing the commencement of many of the forestry-related policy changes
• extending the timeframe for participants to opt in to averaging accounting, before averaging becomes mandatory for post-1989 forests
• clarifying the penalties for permanent forestry non-compliance improving the design of the pre-1990 offsetting regime clarifying the rules and liabilities for transmissions of interest.

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