Annual updates to emission unit limits and price control settings

The Minister of Climate Change is required to update the overall limit, sub-limits, and price control settings in the NZ ETS every year. This is to ensure there is a five-year look ahead period. This page provides detail about this process.

Annual updates to overall limit and price control settings

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 August 2021 decisions were made to update the overall limit and price control settings to ensure they cover 2022-2026. The decisions are detailed in the tables below.

The Climate Change Commission will recommend NZ ETS unit limits and price control settings to the government every year, beginning in 2022.

If the Government adopts limits and price control settings that differ from the Climate Change Commission’s recommendations, it must publicly explain why.

Updates to NZ ETS price control settings

  Minimum price below which units must not be sold by auction ($) Trigger price for sale of reserve amount of New Zealand units ($) Reserve amount of New Zealand units (millions)  
Calendar Year Current Updated Current Updated Current Updated
2022 $20.40 $30.00 $51.00 $70.00 7.0 7.0
2023 $20.81 $32.10 $52.02 $78.40 7.0 7.0
2024 $21.22 $34.35 $53.06 $87.81 7.0 7.0
2025 $21.65 $36.75 $54.12 $98.34 6.9 6.8
2026   $39.32   $110.15   6.7

Updates to NZ ETS unit limit settings

  New Zealand units available by auction (millions)* Approved overseas units used (millions) Overall limit on units (millions)
Calendar Year Current Updated Current Updated Current Updated
2022 26.3 26.3 0 00 34.5 34.5
2023 25.6 25.6 0 0 34.5 34.5
2024 24.2 25.0 0 0 32.9 32.9
2025 22.4 23.3 0 0 31.1 29.6
2026   21.7   0   27.9

* The total number of NZUs available to be sold at auction includes the reserve amount of New Zealand units, see table above.

Figure 1. Five-year look ahead period for limits and price control settings

Five year look ahead period for unit supply settings 0 v3

The five-year process means:

  • announcing new unit limit volumes and price control settings for the fifth year
  • considering whether new limits and price control settings should be recommended for years 3 and 4
  • potentially prescribing new limits and price control settings for years 1 and 2, if the amendment is justified by special circumstances that require change.

The special circumstances which could justify a change include:

  • a change that has significantly affected any matter that the Minister is required to consider under section 30GC of the Climate Change Response Act 2002 [New Zealand Legislation website]. For example, projected trends, proper functioning of the scheme.
  • a change in the emissions budget, nationally determined contribution under the Paris Agreement or emission reduction targets that applies to the year in which the amendment is made
  • if the cost containment reserve is released or units are auctioned at their minimum price
  • a force majeure event (e.g., an unforeseeable circumstance)

There is a one-off exception to this rule. Once the Government has set the first emissions budget, the Minister must amend regulations to ensure they prescribe new limits and price control settings for each of the next 5 calendar years. This includes prescribing new limits and price control settings for years 1 and or 2.

Resources

The provisional emissions budget, unit limits and price control settings were consulted on as part of the proposals for NZ ETS settings. To review the proposal see Reforming the New Zealand Emissions Trading Scheme: Proposed settings.

See also the Summary of submissions from the consultation.