New Zealand party proposes offshore carbon mitigation

Market: Emissions
17/01/24

New Zealand's government minority coalition party ACT has proposed in a draft bill that local companies be allowed to use international carbon credits to mitigate their emissions under the country's Emissions Trading Scheme (ETS).

A so-called member's bill from ACT member of parliament Simon Court proposes changes to the Climate Change Response Act 2002, the legislation that established the ETS, making it easier for New Zealand to use offshore mitigation to meet its emissions targets.

Offshore mitigation is already stipulated in the current legislation, but the country's Climate Change Commission (CCC) presently needs to advise the government on "an appropriate limit" on offshore mitigation that "may be used" to meet one of its multi-year emissions budgets, as well as provide an explanation for such need. Emissions budgets must be "as far as possible" met through domestic emissions reductions and removals according to the existing legislation, with the draft bill proposing that budgets be met either by domestic means or through offshore mitigation or a combination of both, with the government to be neutral in the matter.

Local market participants have been mostly surrendering New Zealand units (NZUs) to meet their obligations since mid-2015, following changes that restricted the use of overseas units in New Zealand. There have been no overseas transfers in the country since November 2015, according to New Zealand's Environmental Protection Authority (EPA).

Separate regulations could set quality standards for both NZUs and "approved overseas units", according to ACT's draft bill.

Members' bills are introduced by members of parliament who are not ministers and follow a ballot system, with few of them effectively becoming law, according to the New Zealand parliament. ACT formed a three-party coalition with the main National party and the NZ First party last November, following the October elections that dumped the Labour party after six years in power.

The new government immediately announced it was stopping work on a review of the ETS system started in June by the Labour government. The review would focus on the benefits, trade-offs and risks of changing the ETS to incentivise gross emissions reductions, but was "driving uncertainty" and was a factor in failed carbon allowance auctions in the country, new climate change minister Simon Watts said last month. New Zealand introduced quarterly auctions to sells NZUs in 2021 but all four ones in 2023 failed to sell any quantities, with a total of 23mn unsold units being cancelled as a result.

New Zealand has set a 50pc greenhouse gas (GHG) emissions reduction target by 2030 from 2005 levels on a net basis.

By Juan Weik

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