Carbon News
  • Members
    • Login
      Forgot Password?
    • Not a member? Subscribe
    • Forgot Password
      Back to Login
    • Not a member? Subscribe
  • Home
  • New Zealand
    • Politics
    • Energy
    • Agriculture
    • Carbon emissions
    • Transport
    • Forestry
    • Business
  • Markets
    • Analysis
    • NZ carbon price
  • International
    • Australia
    • United States
    • China
    • Europe
    • United Kingdom
    • Canada
    • Asia
    • Pacific
    • Antarctic/Arctic
    • Africa
    • South America
    • United Nations
  • News Direct
    • Media releases
    • Climate calendar
  • About Carbon News
    • Contact us
    • Advertising
    • Subscribe
    • Service
    • Policies

Government in the dock over ETS decisions

10 May 2023


Lawyers for Climate Action New Zealand (LCANZI) has filed high court proceedings challenging Cabinet’s rejection of the Climate Change Commission’s advice on the emissions trading scheme settings.

Late last year, Cabinet decided not to adopt the commission’s recommendations to significantly increase the trigger price of the ETS’s cost containment reserve.


The advice saw the price of NZUs hit an all time high of $88.50 on the secondary market in November, and if adopted was expected to result in the price rising further, with the trigger price set at a level where the reserve was rarely if ever released.

 

With inflation front of mind, Cabinet decided to go against the advice of the commission - and climate minister James Shaw who sits outside cabinet - and stick with the status quo.

 

That decision has seen the price of carbon tumble to around $54 a tonne this week - well below the price experts agree is required to incentivise the switch from fossil fuels to renewables.

 

The decision also increases the likelihood of an additional 35 million NZUs being added to the ETS due to the trigger price being breached.

 

The commission had recommended introducing a two tiered trigger price set at $171 and $214. Cabinet decided to stick with the status quo of a single tier at just over $80.

 

LCANZI says that, in overriding the recommendations, Cabinet failed to address whether the settings were in accordance with the emissions budgets and the NDC.

 

“Instead the decision was driven by concerns that rising ETS unit prices would flow through to households.”

 

LCANZI is seeking a declaration from the Court that the regulations are inconsistent with the Climate Change Response Act, and an order that the regulations be remade. 

 

“These errors need to be addressed if Aotearoa New Zealand is to meet its obligations and address climate change in a way that is just and equitable,” LCANZI president Bronwyn Carruthers KC said.

 

“The ETS is supposed to act like a tether on our emissions. But, Cabinet signalled that whenever tension starts to go on it will throw out more rope. Unsurprisingly, the price of ETS units has collapsed following the December decision.”

 

“The Minister received expert advice from the Climate Change Commission which could have resulted in ETS settings that go some way to meeting our climate change obligations. Instead, regulations were weakened, moving us further away from meeting our obligations,” Carruthers said.

 

The many permutations of Cabinet's decision 

 

It’s been widely reported elsewhere that the Cabinet decision has resulted in a big hole in its revenues and will result in the addition of an extra 35 million NZUs entering the ETS.

 

Both could be true but it’s unlikely both will end up being true.

 

It’s too soon to say how big the drop in revenue due to the price fall and the subsequent failed ETS auction earlier this year will be.

 

That’s because there are so many possible outcomes of the decision. One - fairly likely - scenario is the next three auctions will fail, resulting in government missing out on the revenue from the sale of 17.9 million NZUs. 

 

Another is the entire allocation is sold for an average of $79, the price achieved at the last successful auction, and the government pockets $1.414 billion.

 

And that’s still a possibility, with three auctions still to go and the allocation from each failed auction being shunted forward to the next.

 

However, the chances of that happening decrease with each failed auction as the bar to clearing rises along with the number of NZUs up for grabs. (It’s complicated and we won’t go into the explanation for that right now.)

 

If the final ETS auction of the year in December fails, the entire 17.9 million NZUs are wiped from the current stockpile of about 140 million tonnes.

 

 

 

And that would be a good thing for the climate … probably.

 

The probably creeps in because the decrease in supply will result in an increase in demand, a higher NZU price going forward, and an increased likelihood of the trigger price being breached releasing the the cost containment reserve.

 

In the event that some or all of the 35 million NZUs in the cost containment reserve for the next five year are released, the government’s revenues will get a healthy bump.

 

But any chance of the country meeting its carbon targets with emissions reductions due to the price of carbon and the ETS will be severely compromised. 

 

An earlier case taken by LCANZI against the Climate Change Commission and the minister of climate change, James Shaw, arguing they had got their carbon maths wrong, was rejected by the High Court last year.

 

LCANZI is appealing that decision and hopes the court will rule on its current case before the government makes its next ETS decision.

print this story


Story copyright © Carbon News 2023

Related Topics:   Carbon Credits Carbon prices Emissions trading NZ ETS Politics

More >
New Zealand
More >
Former Climate Commission Chair Dr Rod Carr

Markets aren't going to save us – Carr

Wed 9 Jul 2025

By Shannon Morris-Williams | Consumerism is reaching its ecological and economic limits, and only systemic change - not market tweaks - can steer us away from climate catastrophe, according to former Climate Change Commission chair Rod Carr.

Megan Woods

Climate backtracking could impact trade relationships: Labour

Wed 9 Jul 2025

By Liz Kivi | Labour Party Energy spokesperson Megan Woods says the government needs to be upfront about how its energy policies will impact trade relationships, following revelations New Zealand was warned by other governments that backtracking on climate policies jeopardised its membership of an international alliance.

NZ Post drops science-based climate target

Tue 8 Jul 2025

By Liz Kivi | NZ Post has dropped its science-based emissions reduction target of 42% by 2030 with no plans to replace it.

Mayor Nick Smith and chief executive Nigel Philpott had reservations about the target.

Nelson adopts ambitious target to slash emissions

Tue 8 Jul 2025

By Max Frethey, Local Democracy Reporter | After some of the most passionate debate seen in the chamber this triennium, Nelson City Council has adopted the more ambitious of two community greenhouse gas targets.

Clear-sighted view to trade-offs crucial to reimagining our relationship with the land

Mon 7 Jul 2025

By Nick Swallow | COMMENT: New Zealand could see a 70% drop in the value of dairy land if we pursue our emissions targets for agriculture, according to a new report.

Regulations Minister David Seymour

Open letter warns against Seymour's Regulatory Standards Bill

Fri 4 Jul 2025

By Shannon Morris-Williams | A group of prominent New Zealanders are speaking out against the Regulatory Standards Bill, with top climate scientist Jim Salinger warning it will have a chilling effect on future climate change and adaptation policy.

Basis co-founders Danny Purcell and Julyan Collett

Kiwi ‘smart panel’ startup aiming to reduce energy bills and emissions

Fri 4 Jul 2025

NZ start-up Basis this week launched an ‘intelligent’ panel to replace traditional electrical switchboards in homes, which it says can save the average home $1,200 NZD annually on bills and lead to lower emissions.

Waihopai and Wairau rivers

Media round-up

Fri 4 Jul 2025

In our weekly round-up of climate coverage in local media: Proposed changes to forestry rules won’t solve the ‘slash’ problem; New Plymouth District Council officially opposes seabed mining; and is local media coverage of climate change lacking when reporting extreme weather events?

New Zealand Prime Minister Christopher Luxon with European Commission president Ursula von der Leyen

International group urges PM to strengthen climate targets

3 Jul 2025

By Liz Kivi | An international group of New Zealanders working on climate change issues has written to Prime Minister Christopher Luxon warning him against weakening climate targets.

Flaring burns off excess methane in oil and gas fields, preventing the potent greenhouse gas from accumulating.

MethaneSAT loss ‘a tragedy’

3 Jul 2025

By Liz Kivi | The disappearance of a methane-tracking satellite, which was backed by $29 million of government funding, is a tragic loss according to one astrophysicist, who is calling for a review to understand how New Zealand blew past multiple red flags about its operation.

Carbon News

Subscriptions, Advertising & General

[email protected]

Editorial

[email protected]

We welcome comments, news tips and suggestions - please also use this address to submit all media releases for News Direct).

Useful Links
Home About Carbon News Contact us Advertising Subscribe Service Policies
New Zealand
Politics Energy Agriculture Carbon emissions Transport Forestry Business
International
Australia United States China Europe United Kingdom Canada Asia Pacific Antarctic/Arctic Africa South America United Nations
Home
Markets
Analysis NZ carbon price
News Direct
Media releases Climate calendar

© 2008-2025 Carbon News. All Rights Reserved. • Your IP Address: 18.97.9.170 • User account: Sign In

Please wait...
Audit log: