The Carbon Challenge: New Zealand's Emissions Trading Scheme

Achieving and maintaining institutional feasibility in emissions trading: the case of New Zealand

“…Like the EU ETS, the NZ ETS was viable after other policy instruments failed first (the EU experience was described by Ellerman et al 2010) (Bullock 2012, Bertram andTerry 2010) and 2012 were perceived as rushed and inadequate; for example, over 90% of individual submissions for the 2012 amendments complained about this (Hood, 2010;MfE, 2009aMfE, , 2012a. The seven week review process for the 2012 amendment bill was also criticised by opposition parties because the process "did not include environmental organisations, the general public, or members of opposition parties who rely on a genuine select committee process to hold the Government of the day to account."…”

“…Free allocation for the industrial processes sector, agriculture (when covered), and some downstream energy and fuel users (but not upstream fuel and energy companies who can pass prices on to consumers) was deemed necessary to protect competitiveness and reduce carbon leakage risks (MfE 2009b).While the change in 2009 from grandparenting to intensity based allocation was criticised for weakening incentives for emission reductions (see e.g. Bertram & Terry, 2010), most businesses in interviews and public submissions claimed that the intensity-based allocation system incentivises emission reductions at the margin. The largest business lobby argued that being too generous and over-allocating was not as large a risk as under-allocation, which would result in lost investment (Business New Zealand 2011).…”

“…Interviewed participants in other sectors perceive high levels of free allocation giving favourable treatment to some sectors over others (see also ETS Review Panel 2011). The lack of transparency around the actual methodology used and justification of the levels of allocation has also been a source of contention (Bertram and Terry 2010;Hood 2010; Parliamentary Commissioner for the Environment 2011).…”

“…Many of the removals are from forests planted in the early 1990s in response to a spike in log prices and a government policy for tax deductible costs. This so called wall of wood is due to be harvested in the 2020s and has a significant impact on projected emissions, with significant potential liabilities (Bertram and Terry 2010;Karpas and Kerr 2011); influencing New Zealand's decision not to sign up to the second commitment period under the Kyoto Protocol (Smellie 2012), and highlighting the use of forest sinks as only a temporary solution for mitigation (Bibbee 2011). …”

Spatial and Temporal Responses to an Emissions Trading Scheme Covering Agriculture and Forestry: Simulation Results from New Zealand

“…The scheme was designed to eventually cover all sectors of the New Zealand economy and all six greenhouse gases covered by the Kyoto Protocol. The New Zealand ETS has no explicit "cap", but is implemented to meet a New Zealand target; some New Zealand Units (NZUs) enter the market through free allocation, and participants can also purchase them from foresters or surrender Kyoto units bought on the international market [2,3]. In this paper, we focus on the forestry and agriculture sectors.…”