The Government has confirmed that New Zealand emitters with obligations under the emissions trading scheme will only be able to use internationally traded Kyoto Protocol emissions units to meet their ETS obligations until May 2015.
That has been widely understood to be situation since late last year when the Government declined to undertake obligations under Kyoto's second commitment period which started this year. The decision meant that its access to the Kyoto markets would end in 2015 when New Zealand squares accounts with the other countries which undertook commitments under Kyoto's first commitments period, 2008 to 2012.
It was never likely the Government would continue beyond then to accept for domestic purposes units for which it no longer had a use itself.
In the mean time allowing firms with ETS obligations to meet them entirely with imported units - of which there is a global glut and whose price has fallen as low as a few cents a tonne - has rendered the ETS ineffectual as a mechanism for curbing emissions and largely crowded out of the market New Zealand units issued by the Government to forest owners and others.
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Acting Climate Change Minister Simon Bridges said today participants could continue to use Kyoto Protocol first commitment period certified emission reduction units (CERs), emission reduction units (ERUs), and removal units (RMUs) for surrender obligations up until 31 May 2015, after which those units would no longer be eligible for surrender. "From then they will need to surrender New Zealand units (NZUs) to meet their obligations."
On Monday Climate Change Minister Tim Groser scotched market rumours that the Government planned to introduce a floor price to the ETS, saying it would be inconsistent with the Government's aim of limiting the cost of the ETS on households and businesses.
Lizzie Chambers of carbon brokers Carbon Match said today's announcement was simply a "useful reiteration in black and white of what all participants already knew; namely that those with an ETS liability should not expect to be able to square it off with Kyoto units (ERUs, CERs etc) any later than 31 May 2015".
Stuart Frazer of Frazer Lindstrom said "All ETS particpants with brains are counting on being able to use international units for the 2013 and 2014 compliance years ... All that has happened today is that (the Government) has just confirmed that is the case."