New Zealand’s Climate Change Minister Paula Bennett is considering cancelling 122.2 million surplus Kyoto units, a move that might also spur the government to impose tougher targets on ETS sectors.
It comes amid heightened public attention on New Zealand’s climate policy in the wake of a report released last week that said the reliance on ‘dodgy’ Eastern European carbon credits rendered the country “climate cheats”.
The credits are estimated to be left over from a total 110 million ERUs bought by the country and participants in its ETS, leaving New Zealand with a surplus of Kyoto units after 372.8 million AAUs, CERs, ERUs and RMUs were surrendered to comply with Kyoto’s first compliance period (2008-2012).
The report, published by the Morgan Foundation, said that even though New Zealand’s emissions are rising, it is estimated to have 93.6 million Kyoto units remaining after it retires what it needs to meet its 2020 emissions reduction targets.
The Greens support cancelling the 122.2 million unused ERUs, most of which were unilaterally created by the Ukraine and Russia and have been found to lack environmental integrity, saying the emissions rights related to them shouldn’t be used now or beyond 2020.
Bennett, who signed the Paris Agreement in New York on behalf of New Zealand last week, is currently weighing her options.
“She is taking advice but won’t be making any decisions in the next few weeks,” a spokesperson for Bennett told Carbon Pulse.
According to UN data, at the end of 2015 New Zealand had unused inventories of 129.2 million AAUs, 13.7 million ERUs, and 202,000 CERs sitting in its Kyoto holding account.
Climate policy-makers and ETS participants in New Zealand have long been aware of the fact that, before the units were banned, the country imported several hundred million cheap ERUs from Ukraine and Russia to meet ETS obligations, in turn saving domestic NZUs for future use.
But the Morgan report sparked big headlines in mainstream media, putting the government under pressure from opposition parties, green groups, and the public to come up with a more credible climate policy.
The 122.2 million units are held by the government, and cancelling them would not in itself impact the fundamental market situation in the ETS.
But voiding the surplus, equal to nearly double New Zealand’s annual GHG emissions, might push the government to look for ETS sectors to make deeper cuts in the future to ensure the country meets its targets, as it is barred from purchasing further Kyoto units after declining to renew its membership in the treaty.
The government is already in the process of reviewing the emissions trading scheme and has signalled to the market it wants a higher carbon price to achieve deeper cuts.
Meanwhile, climate spokesperson for the opposition Labour party Megan Woods on Tuesday proposed New Zealand set up a cross-party committee to design the nation’s long-term climate change policy.
This would ensure the climate policy would remain stable regardless of the outcome of New Zealand’s three-yearly elections, she told TV3.
“These are plans that are going to take decades to implement. Business needs some certainty around the kind of regulatory environment that they’re going to be facing,” Woods said.
The number of ERUs bought by New Zealand stated in the third paragraph has been corrected to 110 million, after the initial version of the story wrongly said 495 million.
By Stian Reklev – stian@carbon-pulse.com
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