Our ETS Submission: Getting the Price and Unit Settings under the ETS Right

We have submitted feedback on the Ministry for the Environment’s consultation on proposed price and unit settings under the Emissions Trading Scheme.

We’ve been engaging with the Ministry about this consultation over the past month. While we support the broad direction of the Climate Change Commission’s recommended settings, which are reflected in the Ministry’s Consultation Document, we do have some concerns about the consultation itself and some of the possible options (including lowering the price corridor).

Although the Ministry responded to some of our concerns by releasing additional modelling at the end of last month, it’s still not clear that the approach outlined in the consultation document lines up with Palmer J’s judgment in our successful litigation about the ETS price and unit settings last year.

 In particular:

  • The Consultation Document fails to put forward a specific recommendation about the package of settings to be introduced by regulation. The additional base volumes, cost containment reserve volumes, and cost containment reserve trigger price must be viewed as a package that needs to be assessed against the emissions budget and 2030 NDC, rather than the Ministry’s approach which is to view each separately. We’re concerned that the approach laid out in the Consultation Document risks repeating the errors that occurred in 2022.

  • The Consultation Document, and the additional modelling released on 30 May 2024, fail to properly assess whether the proposed settings are “in accordance with” the emissions budget, NDC, or the 2050 net zero target. Under the Climate Change Response Act, the starting point should be “strict accordance”, and any discrepancy must be justified by reference to the factors under the Act and still ensure some degree of accordance. The Consultation Document does not attempt to ascertain what settings are implied by “strict accordance”, nor does it identify any implied discrepancies or seek to justify them.

Getting the ETS price and unit settings right and ensuring they meet the requirements under the Climate Change Response Act is critical, particularly given the Government has made clear that it intends to use the ETS to do the “heavy lifting” in our climate change policy response. 

But with decisions like the Government’s confirmation this week that it’s deferring the pricing of agricultural emissions until 2030, it’s getting harder to see how the ETS is going to be able to play this role without reform.

LCANZI