Source: Radio New Zealand
123RF
The Climate Change Commission said the Emissions Trading Scheme (ETS) is on track to fail without reform.
In its annual advice to the government, the commission warned that the scheme faces huge future volatility and would fail without reform by the 2030s.
The ETS is a market in which the government sets a price for greenhouse gas that polluters must pay to emit. The price of units rises over time, incentivising firms to emit less.
The commission has advised the government this year to keep auction unit pricing and volumes the same to prevent price instability.
However, chief executive Jo Hendy said a unit shortfall as early as 2028 could see price spikes and significant economic harm.
She said that could result in factory closures to reduce emissions, rather than investment in decarbonisation.
The government could get ahead of the shortfall by publicly consulting on options to address it, she said.
Forest and Bird fears the scheme will soon be unfit for purpose.
Climate spokesperson Scott Burnett said the market had lost confidence in it, due to recent volatility in prices and recent government policy announcements, such as rolling back action on agricultural emissions.
He said it urgently needed reform and stability to allow businesses to make good investment decisions on decarbonisation.
The Climate Change Commission had been sounding the alarm on the fragile state of the ETS for years, he said.
Climate minister Simon Watts told RNZ in a statement that the government welcomed the commission’s advice, and it would carefully consider that before developing proposals for the ETS auction and unit settings.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
