Managing Scarcity and Ambition in the NZ ETS

Leining, Catherine; Kerr, Suzi

doi:10.2139/ssrn.3477060

Cited by 1 publication

(2 citation statements)

References 3 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The dates chosen and the level and shape of the paths are all decisions to be made. For further discussion of cap setting in the NZ ETS, see Leining and Kerr (2019). The level of the cap should be set to align domestic net emissions and emission prices with:…”

Section: Set a Cap On Free Allocation And Auctioningmentioning

confidence: 99%

“…The operation of ETS price management mechanisms is interdependent on other design features affecting unit supply. Two companion working papers (Leining and Kerr, 2019; address management of domestic unit supply under an ETS cap and linking to overseas markets. The three papers elaborate on the summary proposal for managing unit supply, prices, and linking in the NZ ETS that was presented in Kerr et al (2017).…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Uncertainty, Risk and Investment and the NZ ETS

Kerr

Leining

2019

SSRN Journal

Self Cite

View full text Add to dashboard Cite

New Zealand is facing a challenging low-emission transition, and effective emission pricing needs to be part of the solution. In its pure form, an emissions trading system (ETS) fixes the quantity of emissions in regulated sectors and the market sets the emission price. In New Zealand's current policy and market context, there is value in managing both unit supply and emission prices under the NZ ETS. While emission price changes in response to policy and market conditions are desirable to drive efficient abatement, excessive price instability can deter low-emission investment. This working paper, which evolved under Motu's ETS Dialogue process from 2016 to 2018, explores key considerations for emission price management in the context of a specific working model for unit supply in the NZ ETS. Emission price instability can be reduced at its source by reinforcing policy commitment and improving market regulation and development. Emission price instability can be mitigated by incorporating a price ceiling (cost containment reserve backed by a fixed-price option) and a price floor (auction reserve price) into the auction mechanism. Decisions on price management should be coordinated with other decisions affecting unit supply, guided by an indicative ten-year trajectory for both unit supply and emission prices, and informed by independent advice. Two companion working papers address interactions between ETS price management and the choice of cap and linking to overseas markets. The three working papers elaborate on an integrated proposal for managing unit supply, prices, and linking in the NZ ETS that was presented in Kerr et al. (2017).

show abstract

Section: Set a Cap On Free Allocation And Auctioningmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%