The paper estimates that 140 million surplus NZUs have been banked and the Government acknowledges that oversupply has led to price volatility, undermining of emissions reductions, and presents fiscal risk to future Governments. Removal of the '2 for 1' emission subsidy would double the annual ETS demand from around 20m to 40m and go a long way in soaking up excess banked units. The document indicates full surrender obligations could be implemented before the end of 2016.
Submissions on priority issues close 19 February 2016.
Other review issues relating to the future direction of the NZ ETS are on a slower track. Issues flagged for consideration include managing price stability, the use of international units, and auctioning of NZUs by Government. All of these issues have the potential to undermine effective carbon pricing and are a major concern. However, the paper recognises this, and lists options such as implementing price floors, limiting the use of overseas units, and delaying auctioning until the medium to long term once banked NZUs have diminished.
Submissions on other issues close 30 April 2016.
To read the ETS Discussion Document and/or make a submission click here.