New Zealand will strengthen its emissions trading scheme, Environment Minister Nick Smith has told parliament, raising hopes that the upcoming ETS review can boost the domestic carbon market.
The statement came in response to a question from the opposition on Thursday about the government’s plans to reduce greenhouse gas emissions.
“On climate change we are working on new initiatives around electric cars and strengthening the ETS,” Smith replied.
He said the outcome of the UN climate summit in Paris would be crucial to New Zealand’s climate policy.
New Zealand will review the ETS this year – Climate Change Minister Tim Groser confirmed at an Auckland conference on Wednesday that the review would get underway before the end of the year – but the government has given little indication in terms of which changes, if any, the market might expect.
Carbon allowances in New Zealand are among the cheapest in the world, and the scheme has been criticised for failing to help cutting emissions.
Market experts told Carbon Pulse in July they expected the government to remove some of the cost containment measures that have been put in place to ensure the scheme is not too costly, but that they didn’t expect major changes.
“The two-for-one will go, I count that as a definite. Then we might see something on auctioning,” one observer said.
The government has legislated for the option to auction NZUs to replace some of the supply that was lost when UN offsets became ineligible earlier this year, but has not revealed any specific plans on how or when that might happen.
Government documents have suggested that the review will also consider bringing agriculture, which accounts for nearly half of the nation’s emissions, into the scheme but observers doubt that will happen as the government has been firmly against such a move for years.
It might also remove the NZ$25 price cap built into the scheme, although with NZUs currently trading around NZ$7 that would not have any practical consequences in the foreseeable future.
By Stian Reklev – firstname.lastname@example.org