The Minister of Climate Change is required to update the overall limit, sub-limits, and price control settings every year. This is to ensure there is a five-year look ahead period, see Figure 1 below. For example, in July 2023 decisions were made to update the unit limits and price control settings to ensure they cover 2024-2028. Changes were also made to December 2023 auction settings, following a reconsideration of decisions made in 2022 after settlement of a judicial review.
The Climate Change Commission recommends NZ ETS unit limits and price control settings to the government every year.
If the Government adopts unit limits and price control settings that differ from the Climate Change Commission’s recommendations, it must publicly explain why.
The unit limits that must be prescribed in regulations are:
- a limit on the total number of NZUs available by auction. This is comprised of annual auction volume plus the volume available within the cost containment reserve (CCR) and is shown in the table below
- a limit on approved overseas units; which, as New Zealand currently has no access to offshore mitigation, is zero
- an overall limit on units, often referred to as the NZ ETS cap. It consists of units available by auction, by other means (e.g. from industrial allocation) and approved overseas units. This excludes consideration of units transferred for removal activities