Climate Change mess just got messier
Friday 21 Jul 2023
The Climate Change Response Act 2002 requires the Minister (Shaw) to satisfy himself as to certain matters before regulations are promulgated. Shaw agreed with the Commission’s 2022 advice. He didn’t think the cost-of-living impact was relevant to future price and supply settings for the ETS. The Cabinet did, but it was not its call to make. Shaw then promulgated regulations in accordance with Cabinet’s view, but not his own.
The High Court has given Shaw until 30 September to reconsider his view. Unless the Government changes the law, it appears they are bound to accept his view, although they retain the right to persuade him to theirs. If, in coming to a view, he considers irrelevant considerations, or fails to consider relevant considerations, he will likely be judicially reviewed again.
What the High Court decision shows is two things: first, the ETS is not a government plaything, liable to be pushed out of shape by political and ideological considerations. The Court has a role to play in ensuring the Minister and the Government don’t try to make it one. Second, and subject to Court control, it is the Minister and not the Cabinet that is in control when it comes to price and supply settings.
The full implications of the High Court decision are yet to be felt. Before the invalid regulations were promulgated last December, NZU spot prices were near $90/NZU. As a result of those regulations, reflecting the Cabinet’s views but not Shaw’s, the price fell to around $53/NZU as buyers refused to pay more for NZUs when it appeared Cabinet could change ETS settings for political and not climate reasons.
Then the Government scored an own goal on 19 June 2023, when it launched its ETS Review consultation, by further signalling to the market that it cannot be trusted not to change the rules for 28-year investments after they were made, causing prices to drop as low as $34/NZU.
The full implications of the High Court decision have yet to be felt. First, the auction in early September of NZUs will be under the invalid settings, but little probably turns on this as the consensus is it will likely fail as the last two this year have. Second, after the auction, but before 30 September 2023, the Minister must satisfy himself on new price and unit settings under the ETS for 2023-2027. And third, invalid decisions have legal consequences, and no doubt someone will seek legal redress for losses the invalid regulations have caused them, at least if the NZU price doesn’t recover sufficiently and they haven’t been forced to sell in the meantime. Below we look at the second of these.
Source: Halt NZU Grab
In response to the announcement, the Forest Owners Association says the successful judicial review of the workings of the Emissions Trading Scheme shows government attitudes and actions are jeopardising New Zealand reaching its greenhouse gas reduction goals. Read more.
Further coverage on climate activists that won a lawsuit late last week appears to bumped up the faltering carbon price. Read more
In addition to these issues, the Minister is also now likely to have the UN breathing down his neck. See TV1 News 15 July 2023
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