New Zealand reforms its GHG emissions trading scheme

18 Jun 2020

The New Zealand Parliament has approved the Emissions Trading Reform Bill, which will introduce a cap on the total greenhouse gas (GHG) emissions allowed within the Emissions Trading Scheme from 2021. The government proposed to cap the country’s emissions at 354 MtCO2eq over 2021-2025, with a limit of 160 MtCO2eq for industries covered by the ETS. In addition, the bill introduces a set of carbon price controls, preventing prices from going too low or too high, including a NZD35 (US$22.6) fixed price option for 2020, which will be replaced with a cost containment reserve for future years.

According to the Ministry for Environment of New Zealand, gross GHG emissions decreased by 1% in 2018, to reach 79 MtCO2eq. The drop in GHG emissions was mainly due to a decline in emissions from the energy sector (-3%), driven by outages at the Pohokura natural gas field and higher levels of hydro generation (60% in 2018). In 2018, CO2 accounted for 44% of total emissions, followed by methane (43%, mainly biological methane from livestock), nitrous oxide and fluorinated gases (2%). The Land Use, Land-Use Change and Forestry (LULUCF) sector offset 30% of New Zeeland’s gross emissions, with net emissions reaching 55.5 MtCO2eq.

In November 2019, New Zealand adopted a law aiming to cut CO2 emissions to net-zero by 2050, making the new 2050 greenhouse gas (GHG) reduction target legally binding. Methane emissions from animals will have a different treatment, but will still have to reduce by 10% by 2030 and by up to 47% by 2050. The bill also established a Climate Change Commission in charge of elaborating a roadmap and plan to be updated every five years.

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