6 December 2013
The government has decided to phase out the use of some types of Kyoto Protocol emission units within New Zealand's Emissions Trading Scheme.
After 31 May 2015, ETS participants will only be able to surrender New Zealand Units (NZUs) to meet their emissions obligations. In the meantime they will also continue to be able to surrender Kyoto Protocol first commitment period Certified Emission Reduction units (CERs), Emission Reduction Units (ERUs), and Removal Units (RMUs).
Acting Minister for Climate Change Issues Simon Bridges said today that uncertainties in Kyoto markets had prompted the government to act. Factors included "Decisions in the international climate change negotiations in Doha last year, including restrictions on New Zealand's ability to trade any international Kyoto units after 2015, and the lack of action on international markets at the recent Warsaw negotiations."
"These conditions make it preferable for our ETS to operate with restricted access to these markets for the time being."
Mr Bridges confirmed that the current hold on issuing Letters of Approval for direct participation by New Zealand entities in Clean Development Mechanism projects will continue, meaning the ETS will operate with restricted access to Kyoto markets from 2016 onwards.
"The Government considers international markets an important component of the Emissions Trading Scheme, and intends to review the level of access to international markets within it when international market conditions are better suited to New Zealand's domestic circumstances."
Mr Bridges also announced a complementary decision around the use of existing Kyoto units in the ETS after May 2015.
The decision allows participants to continue to use Kyoto Protocol first commitment period Certified Emission Reduction units (CERs), Emission Reduction Units (ERUs), and Removal Units (RMUs) to account for surrender obligations up until 31 May 2015, after which these units will no longer be eligible for surrender. From then they will need to surrender New Zealand Units (NZUs) to meet their obligations.
Participants holding New Zealand Assigned Amount Units (NZ AAUs) will be able to use them to account for surrender obligations and will automatically have them carried over for surrender beyond 31 May 2015.
"These two decisions will give certainty to ETS participants as to the use of Kyoto Protocol emission units over the next few years," says Mr Bridges.
"The decisions are consistent with international rules on carry-over and Kyoto market rules agreed in Doha. The carry-over of Kyoto Protocol emission units decision was signalled to participants through consultation undertaken early in 2013."
The Government will actively monitor the impact of these decisions on the operation of the ETS, and will consider using measures such as auctioning New Zealand Units and/or reviewing the use of international units to ensure market liquidity should the need arise. New Zealand remains on track to meet its international climate change commitments, which are not affected by these decisions.
Source: NZ Government media release