Government mulls huge changes to emissions prices

Climate Change Minister James Shaw says the current Emissions Trading Scheme is too weak to ensure all businesses are paying their fair share. Photo / Mark Mitchell

The Government has proposed doubling the cap on the price businesses pay for emissions, prompting accusations it has blindsided companies with an announcement on Christmas Eve.

Climate Change Minister James Shaw and Energy Minister Megan Woods on Thursday night released two consolation documents about changes to the Emissions Trading Scheme and ways to speed up the development of renewable energy.

Major changes proposed, among a raft of others, include lifting the emissions price cap in the ETS to $50 per tonne of emissions, up from $25 in a bid to help curb New Zealand's overall carbon output.

It would also set a minimum price of $20 per tonne.

The Government wants New Zealand's carbon emissions to peak in 2020 and slowly come down towards 2030.

But at the current rate, New Zealand is predicted to fail to meet its obligations under the Paris Agreement.

The ETS – which determines the rules for what companies pay for their carbon output – is seen as one of the major ways the Government can cut emissions, and an increased emissions price encourages companies to emit less.

"The trouble is, under the previous Government the rules of the Emissions Trading Scheme were left too weak to ensure these organisations could contribute their fair share," Shaw said.

"Right now, we're working to reform the Emissions Trading Scheme to better translate our emission reduction targets into a predictable emission price. That will incentivise our biggest polluters to invest in the transition to a clean, green economy."

But the price of the emissions also has a direct impact on the costs of goods in the economy.

The Ministry for the Environment estimates a $25 per-tonne price on carbon increases retail power costs by 10 per cent and petrol prices by about 6 cents. The new increases are likely to bring higher costs.

Farmers are currently not included in the ETS, but the Government has warned they could be hauled into the scheme as early as 2022 if they don't manage their emissions.

A bill going through Parliament right now makes changes to the ETS, but it doesn't specifically set details like the overall emissions that will be allowed, or how many units are auctioned out in the ETS.

These issues are covered in the consultation documents, along with the pricing.

The consultation period closes on February 28.

The Opposition is calling the timing of the release cynical, coming after the close of business on Thursday and right before the summer break.

"This is a wide-ranging document with some potentially costly proposals that businesses deserve to be adequately consulted on," National Party climate change spokesman Scott Simpson said.

"Releasing it days before Christmas and with a submission period over the summer is a cynical move and suggests the Government does not want to hear feedback."

The changes could see significant costs passed onto consumers, Simpson said.

In a statement, Shaw said the timing would allow people to digest the report over the summer "rather than drop it on their desks first thing next year with less time to respond than they have now".

"We're really proud of the changes we're making to ensure a better future for our kids and grandkids," he said.