NZ ETS unit limits and price control settings

16 December 2022

The Government has released its latest New Zealand Emissions Trading Scheme unit limits and price control settings. These were set after receiving independent advice from He Pou a Rangi Climate Change Commission. 

The Commission’s role is to provide independent, evidence-based advice and recommendations to the Government. The Government then makes decisions and sets the direction of policy to give effect to those decisions.

The Government’s response on unit limits is mostly aligned with the Commission’s advice, however there were some differences regarding price control settings. 

The Government’s announcement can be found here: Proposed changes to NZ ETS limit and price control settings for units for 2022 | Ministry for the Environment

The Commission’s advice on the NZ ETS unit limits and price control settings was developed in line with the Climate Change Response Act, as well as the intent of the Government’s emissions budgets and its Emissions Reduction Plan, and taking into account evidence about the emissions prices needed to meet our targets. 

In cases like this where the Government’s decision does not follow the Commission’s advice, the Government must explain its response as soon as it is practical to do so in a report to Parliament and make that report publicly available. The Commission will review the Government’s response in detail to understand the reasoning for the decision.  

Our next advice to the Minister on ETS unit limits and price control settings is due in early 2023, in which the Commission will actively consider the implications of this Government announcement and reported reasoning.  

Later in 2023, the Commission will provide advice on the direction of policy for the Government’s second emissions reduction plan (covering the period 2026–2030). As part of this advice, the Commission will consider broader issues about the structure of the NZ ETS to support achieving emissions budgets already in place.

The Commission will also monitor the Government’s overall progress on addressing climate change, and will report publicly in 2024 and annually thereafter. This process will provide more transparency for businesses, communities and Iwi/Māori about the progress being made towards a thriving, climate resilient, low emissions Aotearoa.