Climate Change Response (Emissions Trading Reform) Amendment Bill

1. Title

This Act may be cited as the Climate Change Response (Emissions Trading Reform) Amendment Act 2020.

2. Commencement

This Act comes into force on a date to be appointed by the Governor-General by Order in Council; and 1 or more orders may be made bringing different provisions into force on different dates.

3. Purpose

The purpose of this Act is to reform the New Zealand Emissions Trading Scheme, replacing other levies and carbon pricing mechanisms.

4. Repeal of the Carbon Tax Act 2017

The Carbon Tax Act 2017 is repealed.

Part 1: Amendments to the Climate Change Response Act 2002

4. Principal Act amended

This Part amends the Climate Change Response Act 2002 (the principal Act).

5. Sections 30GA to 30H replaced

Replace sections 30GA to 30H with:

30GA. Regulations for auctions to sell New Zealand units

(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations under this section that prescribe matters relating to the powers of the Minister under section 6A to sell New Zealand units by auction.

(2) If regulations are to be made under this section, the Minister must recommend the making of regulations that—

• (a) specify the date on which the sale of New Zealand units by auction commences:

• (b) prescribe an indicative schedule for when auctions are planned to be held:

• (c) specify circumstances in which an auction will not be held:

• (d) specify the format of an auction (for example, a single-round, sealed bid format):

• (e) specify rules for the format of the auction (for example, rules on how bids are made and how tied bids are resolved):

• (f) specify criteria, and requirements for registration, that a person must satisfy to participate in an auction:

• (g) specify financial processes that a person must follow when participating in an auction, including requirements for financial assurance, payment, and delivery:

• (h) provide for the results of each auction to be made publicly available.

(3) If regulations are to be made under this section, the Minister may recommend the making of regulations for any or all of the following purposes:

• (a) providing for pilot auctions to be conducted, whether before or after the date on which auctions commence:

• (b) prescribing offences and penalties for the breach of regulations made under this section or section 30GD:

• (c) prescribing infringement offences for the breach of regulations made under this section or section 30GD, and prescribing for those offences—

  • (i) maximum fines not exceeding— > > * (A) $3,000 for an individual: > > * (B) $6,000 in any other case; and >
  • (ii) infringement fees not exceeding— > > * (A) $1,000 for an individual: > > * (B) $2,000 in any other case: >

• (d) prescribing those infringement fees as different amounts for a first, second, or subsequent infringement offence:

• (e) providing for any other matters for the conduct of an auction that the Minister considers relevant to the effective conduct of the auction.

30GB. Regulations about limits and price control settings for units

(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations under this section.

(2) If regulations are to be made under section 30GA, the Minister must recommend the making of regulations under this section that—

• (a) prescribe the following limits for a calendar year: > > * (i) a limit on the New Zealand units available by auction (an individual limit); and > > * (ii) a limit on the approved overseas units used (another individual limit); and > > * (iii) a limit on the sum of the following (the overall limit): >> >> * (A) the New Zealand units available by auction: >> >> * (B) the New Zealand units available by other means: >> >> * (C) the approved overseas units used; and >>
• (b) provide that— > > * (i) the individual limits must not be exceeded; and > > * (ii) the overall limit— >> >> * (A) restricts both the New Zealand units available by auction and the approved overseas units used, in that neither must cause the overall limit to be exceeded; but >> >> * (B) does not restrict the New Zealand units available by other means, in that they may cause the overall limit to be exceeded; and >>

• (c) provide that any additional units that are allocated under section 86C(5)(b) are not counted as New Zealand units available by other means; and

• (d) provide for how a reserve amount of New Zealand units is to be released for sale at auction if a trigger price is reached or exceeded by bidding at an auction, unless the reserve amount and minimum price are set at zero under paragraph (e); and

• (e) prescribe the following price control settings:

  • (i) the reserve amount of New Zealand units for each trigger price, which may be a single reserve amount of zero:

  • (ii) the 1 or more trigger prices, unless the reserve amount is zero:

  • (iii) the minimum price at which units may be sold by auction, which may be zero.

  (3) The Minister must recommend the making of regulations under this section so that,—

• (a) when the regulations are first made, they prescribe limits and price control settings for each of the next 5 or 6 calendar years; and

• (b) the regulations are amended to ensure that, at all times, they prescribe limits and price control settings for each of the next 5 calendar years.

(4) Each time the Minister is to recommend that the regulations be amended to apply to a further calendar year under subsection (3)(b), the Minister—

• (a) must consider whether to recommend prescribing new limits and new price control settings for each of the 2 calendar years before that further calendar year; and

• (b) may recommend prescribing new limits and new price control settings for 1 or both of the 2 calendar years after the year in which the amendment is made.

(5) However, the Minister may make a recommendation under subsection (4)(b) only if,—

• (a) in the year in which the amendment is made, the price control settings have had effect by— > > * (i) the release of a reserve amount of units; or > > * (ii) the sale of units at the minimum price; or >
• (b) the Minister is satisfied that the amendment is justified by the following special circumstances: > > * (i) a change that has significantly affected any matter that the Minister was required to consider under section 30GC when recommending the limits and price control settings that are to be amended; or > > * (ii) a change in the budget or contribution described by section 30GC(2)(a) or (b) that applies to the year to which the amendment applies; or > > * (iii) a force majeure event.

(6) Regulations made under subsection (2)(a)(ii) may be made in respect of different units, transactions, persons, classes of units, subclasses of units, classes of transactions, or classes of persons.

(7) See section 30GC for requirements relating to this section.

(8) In this section,—

• approved overseas units used means the number of approved overseas units used by participants in a calendar year by, for example, being transferred to holding accounts or being surrendered

• New Zealand units available by auction means the number of New Zealand units sold by auction in a calendar year

• New Zealand units available by other means means the number of New Zealand units that are allocated for eligible activities, or provided to participants under negotiated greenhouse agreements, in a calendar year.

30GC. Requirements for regulations about limits and price control settings for units

(1) The Minister must comply with this section in—

• (a) recommending under section 30GB(2), (3), or (4)(b) the making of regulations that prescribe individual limits, overall limits, or price control settings; and

• (b) considering under section 30GB(4)(a) whether to recommend prescribing new individual limits, overall limits, and price control settings for the 2 calendar years before a further calendar year.

(2) The Minister must be satisfied that the limits and price control settings are in accordance with—

• (a) the emissions budget, and the nationally determined contribution for New Zealand under the Paris Agreement, that applies to— > > * (i) the period for which the limits or price control settings are being prescribed; or > > * (ii) any period after that, if a budget or contribution exists for that period; and >
• (b) the 2050 target.

(3) However, they need not strictly accord with the budgets or contributions as long as the Minister is satisfied that the discrepancy is justified, after considering the other matters under this section.

(4) The Minister must consider—

• (a) the main matters; and

• (b) the additional matters, but only in relation to the price control settings.

(5) The main matters are as follows:

• (a) the projected trends for New Zealand’s greenhouse gas emissions in the 5 years after the current year, including— > > * (i) the anticipated volumes of greenhouse gas emissions to which the emissions trading scheme applies (meaning emissions for which participants are required to submit returns or surrender units under this Act); and > > * (ii) the anticipated volumes of greenhouse gas emissions to which the emissions trading scheme does not apply: >

• (b) the proper functioning of the emissions trading scheme:

• (c) international climate change obligations and instruments or contracts that New Zealand has with other jurisdictions to access emissions reductions in their carbon markets:

• (d) the forecast availability and cost of ways to reduce greenhouse gas emissions that may be needed for New Zealand to meet its targets for the reduction of emissions:

• (e) the recommendations made by the Climate Change Commission under section 5ZOA:

• (f) any other matters that the Minister considers relevant.

(6) The additional matters are as follows:

• (a) the impact of emissions prices on households and the economy:

• (b) the level and trajectory of international emissions prices (including price controls in linked markets):

• (c) inflation.

(7) If the Minister makes a recommendation about prescribing limits or price control settings that differs from a recommendation made by the Commission under section 5ZOA, the Minister must, as soon as is reasonably practicable, prepare a report of the reasons for the difference and—

• (a) present a copy of the report to the House of Representatives; and

• (b) make the report publicly available.

30GD. Regulations for auction monitor

(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations under this section.

(2) If regulations are made, or are to be made, under section 30GA, the Minister may recommend the making of regulations under this section for any or all of the following purposes:

• (a) prescribing a method or process by which the Minister may appoint a person as an auction monitor, which must— > > * (i) require the person to be independent of any auction agents and any persons who are likely to be auction participants; and > > * (ii) include as functions of the auction monitor— >> >> * (A) validating auction results; and >> >> * (B) publishing reports on the results of auctions: >>

• (b) specifying that the auction monitor’s functions include any of the following:

  • (i) monitoring the conduct of any auction agents and auction participants:

  • (ii) providing periodic assessments of the auction system and making recommendations for improvements:

  • (iii) calculating additional specified metrics in respect of the auction process and auction results (such as bid volume statistics and relevant aggregate information):

  • (iv) any other functions that the Minister considers are relevant to the effective conduct of the auction monitor’s role.

  (3) In this section and section 30GE,—

• auction agent means any agent appointed under section 6A(b) to conduct an auction

• auction monitor means a person appointed as an auction monitor under regulations recommended under subsection (2)(a)

• auction participant means a potential buyer who participates in an auction.

30GE. Sharing information with auction monitor

(1) The purpose of this section is to facilitate the provision of information—

• (a) from the EPA, the Registrar, the chief executive, or any auction agent (a provider):

• (b) to the auction monitor (if appointed).

(2) A provider must provide information to the auction monitor if the information—

• (a) is requested by the auction monitor; and

• (b) is required by the auction monitor to assist in carrying out its functions.

30GF. Obligation of confidentiality on auction monitor

(1) This section applies to the auction monitor (if appointed) while, and after, the auction monitor performs its functions or exercises its powers.

(2) The auction monitor—

• (a) must keep confidential all information that comes into its knowledge when performing its functions or exercising its powers; and

• (b) must not disclose any of that information, except—

  • (i) with the consent of the person to whom the information relates or to whom the information is confidential; or

  • (ii) to the extent that the information is already in the public domain; or

  • (iii) for the purposes of, or in connection with, the performance of its functions or the exercise of its powers; or

  • (iv) as provided under this Act or any other Act; or

  • (v) in connection with any investigation or inquiry (whether or not preliminary to any proceedings) in respect of, or any proceedings for, an offence against this Act or any other Act; or

  • (vi) for the purpose of complying with international climate change obligations.

(3) The auction monitor commits an offence under section 30GG if the auction monitor knowingly contravenes this section.

(4) Nothing in subsection (2) may be treated as prohibiting the auction monitor from—

• (a) providing or publishing general information in relation to its functions; or

• (b) with the prior approval of the Minister, preparing statistical information and supplying it to any person in a form that does not identify any individual.

30GG. Offence for breach of auction monitor’s obligation of confidentiality

An auction monitor who knowingly acts in contravention of section 30GF commits an offence and is liable on conviction to either or both of the following:

• (a) imprisonment for a term not exceeding 6 months:

• (b) a fine not exceeding $15,000.

30H. Consultation and commencement for certain regulations about units and auctions

(1) This section applies to regulations made under—

• (a) section 30G(1)(b)(i), (c), (j), or (k) (dealings with units under Part 2):

• (b) section 30GA (auctions to sell New Zealand units):

• (c) section 30GB (limits and price controls for units):

• (d) section 30GD (auction monitor).

(2) See sections 3A and 3B for consultation requirements that apply to the making of the regulations.

(3) The regulations come into force—

• (a) 3 months after the date of their notification in the Gazette, or on any later date specified in the regulations; but

• (b) if the Minister considers it is in the national interest that they be made urgently, on any earlier date specified in the regulations.

6. Sections 70 through 86E repealed

Sections 70 through 86E are repealed.

7. Section 178A amended (Option to pay money instead of surrendering units to cover emissions)

(1) In the heading to section 178A, replace “units to cover emissions” with “, repaying, or reimbursing units”.

(2) Replace section 178A(1) with:

(1) This section applies if—

• (a) either— > > * (i) a person is required to surrender or repay units— >> >> * (A) as a result of submitting an emissions return; or >> >> * (B) under section 123(3) or (6) or 183A(2)(b); or >> > * (ii) the EPA is required by this Act to reimburse units to any person; and >
• (b) the units that must be surrendered, repaid, or reimbursed are in respect of,— > > * (i) for an activity on post-1989 forest land, emissions or removals that are attributed by section 178C(3) to a calendar year that ends before the start date for auctions; or > > * (ii) for any other activity, emissions or removals that occurred in a calendar year that ends before the start date for auctions; or > > * (iii) an activity that the person ceased to participate in, and for which the person has submitted an emissions return, before the start date for auctions. >
• (1A) If subsection (1)(b)(i) applies, for the purposes of this section, the units in respect of the emissions or removals attributed to a calendar year must be rounded to the nearest whole number (where 0.5 is rounded up).

(3) In section 178A(2)(a)(i), replace “section 65(4), 118(5), 183A(2)(b), 186H, 187, 189(8), 191, or 193, as applicable” with “the relevant provision”.

(4) In section 178A(2)(a)(ii) and (b)(ii), replace “a sum of $25” with “the fixed price”.

(5) After section 178A(4), insert:

(5) In this section and sections 178B and 178C,—

• fixed price has the meaning given by section 178C

• start date for auctions means the date specified by regulations made under section 30GA(2)(a) as the date on which the sale of New Zealand units by auction commences.

8. Section 178B amended (Issuing New Zealand units to meet surrender obligations)

(1) In section 178B(1), (1)(a), (2), (3), and (3)(a), replace “a sum of $25” with “the fixed price”.

(2) In section 178B(3), replace “to reimburse a person units under section 123(4), 186H, or 189(7)(d)” with “by this Act to reimburse units to any person”.

(3) In section 178B(5), replace “$25” with “the fixed price”.

(4) In section 178B(6), replace “section 18CA(4)” with “section 18CA(2)”.

9. Section 178C replaced (Prohibition on ability to export New Zealand units)

Replace section 178C with:

178C. Fixed price (for option to pay money instead of surrendering, repaying, or reimbursing units)

(1) This section determines the fixed price of a unit for the purposes of sections 178A and 178B.

(2) If the unit that must be surrendered, repaid, or reimbursed is in respect of emissions or removals that occurred in a calendar year that is—

• (a) 2020 or earlier, the fixed price is $25; or

• (b) 2021 or later, but that ends before the start date for auctions, the fixed price is $35.

(3) For the purposes of section 178A, if an emissions return covers more than 1 calendar year of an activity on post-1989 forest land, emissions and removals are attributed to, and treated as having occurred in, each year in the proportion that the year bears to the emissions return period.

(4) The Governor-General may by Order in Council amend the fixed price set out in subsection 2(b).

10. Section 219 repealed

Section 219 is repealed.

11. Schedule 3 amended (Activities with respect to which persons must be participants)

(1) Omit each instance of “and 219”.

(2) In the heading of Part 5 subpart 2, replace “1 January 2011, if determined by Order in Council” with “1 January 2021”.

(3) In the heading of Part 5 subpart 4, replace “1 January 2011, if determined by Order in Council” with “1 January 2021”.

Part 2: Amendments to the Zero Carbon Act 2017

12. Principal Act amended

This Part amends the Zero Carbon Act 2017 (the principal Act).

13. Section 2 amended (Interpretation)

Insert the following definition within its appropriate alphabetical order:

Paris Agreement means the agreement adopted in Paris on 12 December 2015, and includes any amendments that are, or will become, binding on New Zealand from time to time.

14. Section 3 amended (Zero carbon target)

In subsection (2), substitute “sustainable amount” with “sustainable amount, to be interpreted in light of obligations made within the Paris Agreement”.

15. Section 6 amended (Government plan)

Replace subsection (2)(f) with:

• (f) public policy as it pertains to greenhouse gas emissions pricing mechanisms; and

B.308 - Climate Change Response (Emissions Trading Reform) Amendment Bill was authored by /u/SoSaturnistic (Labour) and /u/MinJamesShaw (IRL Figure) and is sponsored by the Minister of the Environment, /u/UncookedMeatloaf (Greens), on behalf of the government.

Committee will conclude at 6 PM, 22/08/2020.