Changes to the Emissions Trading Scheme
The Emissions Trading Scheme (ETS) is changing. Find out how these changes will affect you.
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The Emissions Trading Scheme (ETS) is changing. Find out how these changes will affect you.
The Government has made changes to the ETS through the Climate Change Response (Emissions Trading Reform) Amendment Act 2020, which became law on 22 June 2020. The changes to the ETS provide us with a wider range of compliance tools to help manage and maintain the integrity of the scheme and ensure it achieves its purpose.
For information on penalties specific to agriculture participants and industrial allocation applicants, please go the relevant section below.
If you fail to surrender or repay units by the due date new penalties will automatically apply. Each overdue unit will incur a penalty of 3 x the price of carbon on the due date. This penalty may be substantial, and the Environmental Protection Authority (EPA) does not have discretion to reduce this penalty.
If you fail to submit an emissions return by the due date, and other criteria are satisfied, a penalty may be issued. This penalty is based on emissions and may be substantial.
There is also a new penalty for submitting an incorrect emissions return. This will apply if we need to make an amendment to an emissions return, and are satisfied that you failed to take reasonable care. This penalty may be substantial, particularly if you knowingly failed or made an error.
Voluntary disclosure is a factor we take into consideration when calculating the penalty outcome, so it is recommended you let us know promptly if you have made a mistake.
If you fail to submit an emissions return by the due date, and other criteria are satisfied, a penalty may be issued. This penalty is based on emissions and may be substantial.
There is also a new penalty for submitting an incorrect emissions return. This will apply if we need to make an amendment to an emissions return, and are satisfied that you failed to take reasonable care. This penalty may be substantial, particularly if you knowingly failed or made an error.
Voluntary disclosure is a factor we take into consideration when calculating the penalty outcome, so it is recommended you let us know promptly if you have made a mistake.
We will be publishing guidance on the new penalties in December 2020.
There has been a change in the requirements for being a participant in the ETS for the activity of mining coal. For the 2021 reporting year onwards, you will be a participant if you own a stockpile of least 2,000 tonnes of coal that comes directly from your mining operation.
For 2021 emissions reporting onwards, you are now considered a participant if you meet one or both of the criteria below:
For example: a person mines 2,500 tonnes of coal in 2022, which is direct coal mining and therefore mining coal in 2022. They stop direct coal mining, but still own (from their mining) 2,250 tonnes of coal at the start of 2023 and 2,000 tonnes at the start of 2024. This is coal stockpiling. Therefore they are mining coal in 2023 and 2024, and must report the coal stockpiling in their emissions return.
Emissions returns for mining coal will be updated for 2021 returns will include questions on coal stockpiling. You will need to keep accurate stockpile records for this purpose.
If you apply for a provisional allocation, you receive your entitlement in advance, based on your production for the previous calendar year. To adjust or ‘square up’ your entitlement with what you actually produced, you’re required to make an allocation adjustment in the next application period. If you apply for a provisional allocation in the following year, this adjustment will automatically calculate when you enter the figure for your previous year’s production.
However, if you no longer wish to receive entitlements in advance, you will need to submit an annual adjustment, or, if you are not continuing with the activity, submit a closing allocation application.
If you fail to submit an adjustment to a provisional application (by completing either a new provisional, an annual adjustment or a closing application), by the due date, and other criteria are satisfied, a penalty may be issued. This penalty is based on units the person is entitled to receive, or required to repay, and may be substantial.
A penalty may apply if you provide incorrect information in an allocation application or adjustment. This will apply if we need to make changes to an allocation decision, and are satisfied you failed to take reasonable care. This penalty may be substantial particularly if you knowingly failed or made an error.
Voluntary disclosure is a factor we take into consideration when calculating the penalty outcome, so it is recommended you let us, the EPA, know immediately if you have made a mistake.
If you fail to repay units by the due date a penalty will automatically apply. Each overdue unit will incur a penalty of 3 x the price of carbon on the due date. This penalty may be substantial. We do not have discretion to reduce this penalty. A repayment may apply to industrial allocation recipients if you made an error, or stopped producing having already received a provisional application for the year.
We will be publishing guidance on the new penalties in December 2020.
The Amendment Act has introduced the phase out of industrial allocations from 2021 through two complementary approaches:
The general phase out rate for all industrial allocation activities from 2021 - 2030 is one percentage point (0.01). This means that levels of assistance will reduce from 0.9 to 0.89 (for highly emissions-intensive activities), and from 0.6 to 0.59 (for moderately emissions-intensive activities), in the first year.
The new general phase out rates will show up in provisional allocation applications from 2021, and in the closing and final allocation applications from 2022 (for industrial allocation applications for the 2021 year).
There are a number of changes that affect forestry ETS participants.
Emissions Trading Scheme improvements for forestry - Ministry for Primary Industries
Find out more about ETS improvements for forestry - Ministry for the Environment
We are required to publish data about participants’ returns (emissions or removals) and information about certain penalties imposed. We will give at least 10 working days’ notice of publication. The notice will be via the EPA and Emissions Trading Register websites. The data will then be published in the ETS Reports area of the EPA website after 30 June 2021.
The Fixed Price Option (FPO) or the ability to pay money instead of surrendering or repaying units, increased from $25 to $35, for participants to use to cover emissions in 2020. The FPO will remain in place during the transition to auctioning.
The FPO is also now available for surrenders/repayments arising as a result of an amendment to, or a default assessment of, an emissions return for activities that occurred in the 2020 calendar year or earlier, where a notice under s 123 of the CCRA was issued after the law change on 23 June 2020.
The last calendar year the FPO will be available will be for those activities taking place in 2020.
Read the guidance on when to use the fixed price options (PDF 240 KB)
If you are not in a financial position to pay a new penalty by the due date, you will be able to request to enter into a deferred payment arrangement (for example, to pay by instalments or at a later date). The deferred payment arrangements will be subject to interest charges.
Auctioning in the NZ ETS has been introduced, with the first quarterly auction scheduled for 17 March 2021. To participate in an auction, the first step is to notify the Registrar, via the Manage Account Operator workflow. You can then register for this auction with NZX.
Here is the summary slides for the webinar run by NZX recently on how to participate in the auctions. There will also be another webinar held in the lead up to the first auction.
View the summary slides for the NZX webinar (PDF, 2.7MB)
You also need to ensure your contact details are current and correct within the Register. Details supplied on the NZX auction registration form need to match what is held in the Register. If you need to update your Register contact information, you can complete a “Manage Account Holder details workflow.
View the guide on updating contact details (PDF, 529KB)
To receive ongoing information about auctioning, or if you have any questions, email your details to NZX at auctions@nzx.com.
The Government recently introduced a bill to set a confidential reserve price (formerly known as a technical reserve price) for NZ ETS auctions. The Bill will likely be passed and come into effect before the first auction on March 17 2021.
The confidential reserve price bill consultation is now open for ten days until 21 Feb 2021.
View the Climate Change Response (Auction Price) Amendment Bill – New Zealand Parliament website
The purpose of confidential reserve price is to prevent New Zealand units (NZUs) from being sold at auction at a price significantly below the secondary market price. If the auction clearing price is less than the confidential reserve price then the auction will not sell any units. Unsold units will be rolled forward to be sold at the next auction in the same calendar year.
On 30 November 2020 we cancelled legacy units held in private accounts from the first commitment period of the Kyoto Protocol (starting on 1 January 2008 and ending on 31 December 2012).
The units cancelled were AAUs, ERUs, CERs, and RMUs. If you hold New Zealand issued assigned amount units (NZ AAUs) from this commitment period (NZ AAUs issued for PFSI, NGA, or PRE initiatives), these have been replaced with NZUs as part of this process. Other unit types (ERUs, CERs, RMUs and non-New Zealand issued AAUs) will not be replaced.
If you have any questions, please contact us.
Reforming the New Zealand Emissions Trading Scheme - Ministry for the Environment website