Forestry changes under the ETS

Friday 2 Aug 2019

Free carbon credits to New Zealand’s trade-exposed heavy emitters are being phased out and forests registered in the Emissions Trading Scheme before 2019 will be barred from the new averaging accounting system, the Government has just announced.

The allocation of free credits, worth up to 90 per cent of some industries’ carbon liabilities, will start in 2021, climate minister James Shaw says. It will continue at 1 per cent a year to 2030, 2 per cent a year from 2030 to 2041, and then move to reductions of 3 per cent a year. The free-credit system was designed to shield emissions-intensive trade-exposed industries like steel and aluminium-making and pulp manufacturing from the full impacts of the ETS until other countries adopted carbon pricing.

Shaw says he does not expect the slow phasing out of the subsidy to affect businesses. “Officials have shown that the phase-down does not pose a financial risk to ETS businesses as the ETS accounts for only a small part of a firm’s operating costs, and any additional cost to large polluting businesses will be manageable and will encourage businesses to invest in clean energy alternatives that reduce emissions,” he said in a statement.

“But the Government is aware our industries face international influences, which is why the independent Climate Change Commission will review phase-down rates and advise governments on appropriate allocations if technology, or the economics, or the global situation changes.”

The Government has also announced more details on changes to the forestry sector under the ETS, including banning existing forests from the new averaging system, announced earlier this year. “Averaging is primarily intended to encourage new forests because they make the biggest contribution to reducing our carbon footprint,” forestry minister Shane Jones said in a statement.

“It’s also about managing the volume of carbon units entering the market to maintain a stable price to drive emissions reductions.” The decision will be reviewed by the yet-to-be-established Climate Change Commission in 2021.

More information

- More information about these decisions is available on the Ministry for the Environment’s website.

- Information about the forestry decisions is available on the Ministry for Primary Industries’ website.

- For more information, you can find the press release about these decisions by Ministers James Shaw and Shane Jones.

Source: Carbon News 2019, Ministry for the Environment

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