The Climate Change Commission’s recommended Emissions Trading Scheme (ETS) settings could add anywhere between $85 and $877 to a middle income budget in 2026, according to Treasury modelling.
On Thursday the Commission advised the Government to bring the scheme’s settings “back into step” with the country's emission reduction targets after its previous advice was rejected.
Chairman Rod Carr said current price settings mean the ETS could not function as effectively as it should and would not be sufficient to meet NZ’s emission budget.
The advice was to reduce the number of units auctioned in the next four years by 9.4 million units, increase the auction reserve price by about $30, and the cost containment reserve by more than $85.
Similar advice provided last year was rejected by the Government, which worried letting the carbon price rise would add to the cost of living crisis by increasing energy and fuel costs.
However, modelling by Treasury found a $50 increase in NZ ETS units would only cost middle income households an additional $5.90 per week, or $307 a year.
The work was done in 2022 and estimated the median change in household expenditure on fuel and food, assuming no change in technology or behaviour.
It estimated a $50 increase to the carbon price would cost lower income households between $3.30 and $5 each week, and higher income households between $6.40 and $7.30 each week.
Neither the Climate Change Commission or the Government directly sets the carbon price, rather they set upper and lower boundaries for the market to trade in between.
It is impossible to predict exactly how much NZ ETS units would increase in price if the Government accepted recent advice, but it would likely be between $76 and $205 in 2026.
NZ units on the secondary market were trading at $62 on Friday morning, which means the increase in 2026 could be anywhere between $14 and $143.
The higher price would increase a middle-income household's annual costs by approximately $877, assuming they did nothing to change their consumption patterns.
Of course, NZ units could increase beyond $205 in 2026. The proposed upper bound isn’t a hard limit, rather it is a price at which extra units would be released to meet demand.
The Climate Change Commission has suggested implementing two price triggers in 2026, one at $205 and another at $256. It also said reaching these levels should be rare.
By 2028, the Commission wants the minimum auction price to be $79 and the upper price trigger to be $282. That would add between $95 and $1350 annually to a middle-income household, if Treasury’s modelling was to be believed.
Don’t blink now
The Commission acknowledged the Government’s concern about dumping new costs onto households but warned against rejecting its advice for a second time.
“A fair, inclusive, and equitable transition means that issues of social and economic equity and tackling climate change must be pursued in parallel. One set of issues cannot be used to justify inaction in the other,” it said.
ETS price settings should not be dictated by the impacts on some households or businesses, when the Government can use other policies to directly support those most affected.
New Zealand risks failing to meet its emission budget or experiencing more severe price adjustments in the future. The latter is already happening to an extent.
Having had its previous recommendation ignored, the Commission has had to ratchet up future settings to still meet climate goals.
The Government’s decision in 2022 to set a “relatively high volume of units in the containment reserve at a relatively low price” was likely to increase the surplus already in the system.
“Ultimately, any release of reserve units puts us in debt to the future – we are simply borrowing emissions that will need to be paid back later”.
Of the 144 million units in the scheme, the Commission has estimated that 49 million are surplus, over and above what the emissions budget allows.
It wants to reduce this surplus to zero by 2030 and has lowered auction volume in future years to make up for extra units that could be released in the current period.
To provide certainty for market participants, ETS settings are locked in two years ahead and are unable to be changed. This means new settings would only come into effect in 2026.
But the Commission has recommended a sharp change as soon as possible. The auction and cost containment reserves would almost double, and available units would almost halve.
But this wouldn’t necessarily mean a price shock, as market participants would know the change was coming and be bidding in earlier auctions with that in mind.
The advice alone has pushed up the price of carbon, NZ units fell to an 18-month low of $54 in the secondary market after the failed auction in March. Units were still trading below $60 prior to the release of the Commission’s advice, but have since climbed to $62.50.
Factors that influence market pricing include signals from the Government about its commitment to climate action, information about the costs of decarbonisation, regulatory uncertainty, and price increases in international ETS schemes.
66 Comments
We need to start taking the climate change Commission’s recommendations seriously.
If strong action isn’t ramped up soon, delaying it into the future. Appropriate action then will quickly become insurmountable.
I’ll vote predominantly for climate change action this election.
"Would any sane person think dumpster diving would have stopped Hitler, or that composting would have ended slavery or brought about the eight-hour workday; or that chopping wood and carrying water would have gotten people out of Tsarist prisons; or that dancing around a fire would have helped put in place the Voting Rights Act of 1957 or the Civil Rights Act of 1964? Then why now, with all the world at stake, do so many people retreat into these entirely personal “solutions”? Why are these “solutions” not sufficient? But most importantly, what can be done instead to actually stop the murder of the planet?"
https://www.youtube.com/watch?v=m2TbrtCGbhQ&ab_channel=rwritedotorg
Yeah, honestly I don't think we can realistically be a leader on this. We need the bigger economies like the US and China to bring these changes in first and then use their considerable power to force their trading partners to align so everyone is playing by the same rules.
I'm all ears about who a "vote for climate" might actually involve? From what I have seen, the political spectrum covers increasing demand and therefore emissions, while covering the landscape with solar panels and wringing hands when nothing is achieved, to just increasing emissions while complaining GDP and therefore emissions aren't rising fast enough. And lots of inadequate BS in the middle.
There is a big gap in our political sphere regarding environmental action. We need a party that can realistically get 5% of the vote, but focus solely on environmental outcomes.
It’s very hard for people currently as the greens have so many other political agendas. From a scientific point of view, voting for environmental outcomes makes complete sense. But what else gets thrown in?
We need a solely environmental party
Will TOP prioritise "growing the economy" over a survivable future? Seems our generations nuclear moment isn't enough to move Labours dial.
"The energy minister, Megan Woods, has been defending the decision at the high court this week. Stuff reports that defence counsel Aedeen Boadita-Cormican argued Woods was not legally obliged to consider climate change, but did so anyway, and “gave it [climate change] insufficient weight” to refuse the permits."
https://www.theguardian.com/world/2022/jul/28/climate-crisis-insufficie….
It estimated a $50 increase to the carbon price would cost lower income households between $3.30 and $5 each week, and higher income households between $6.40 and $7.30 each week.
They got that the wrong way around - costs will be greater for lower income households.
True for GST but not wrt energy consumption - as the higher income households have the financial ability to reduce their energy consumption with solar panels, insulation; double-grazing; EVs, heat pumps; energy efficient appliances, etc. Seen a number of academic studies on it. TSY are just pulling the wool. .
I don’t buy that, higher income households obviously have more opportunity but im very confident they will continue to consume more energy and more fossil fuel energy. High income people love land cruisers. Just the amount of domestic flights I personally make (and I’m only middle income) vs someone on the benefit is a big indicator.
Hear, hear. Poor people wouldn't be made worse off by climate adaptations, the market would find the most economical ways to reduce carbon emissions, and there's no need for a climate interventionist government bureaucracy. This is such a sane suggestion I don't know how the government can ignore it.
I cannot get my head around all this stuff.
I assume its to do with making petrol/ diesel/ gas/ coal fuel processes more expensive than they would have been. In parallel with the existing taxes on it all. Because the govt has signed us up to some reduction target.
If reduction is the aim why not just increase the taxes on it? That would be more transparent.
There is a plan to reduce emissions by taxing farts of livestock. This will further incentivise the conversation of farm land to pine and destroy small communities in NZ.
https://amp.cnn.com/cnn/2022/10/11/asia/new-zealand-farmers-cow-sheep-b…
That’s because they’re greenhouse gasses. Framing it in a juvenile way does not change this (and it’s mainly “burps” btw). There’s a lot of strange sources of GHGs; rice farming is a big one, for example.
Why should agriculture be any more exempt than fossil fuel emissions?
If we want to go down the stupid taxing livestock road then fine..tax my sheep /cattle.make sure you are accurate....
Then you can credit me for the carbon sequestered in my native bush/shelterbelts/erosion planting of poplars/soil carbon and grass Absorbtion..also the meat / wool component trucked off my farm..
Hint ..the govt will be sending me a cheque monthly which I can spend on overseas travel and fuel for my mustang.
P.s I could also drain a few wetlands if that helps reduce the farms methane output.
I think they can be net carbon sinks (while still giving off methane)
https://royalsocietypublishing.org/doi/10.1098/rsfs.2019.0129
Basically, it's complicated...
Yes, my understanding is that it depends on the specific type of wetland (of which there are many, e.g. bogs, fens, marshes, mangroves...). However that article makes a good point that even the most cost-effective wetland restoration for carbon sequestration is about US$1800/tonne of CO₂. The current price of an NZU is under NZ$100, seemingly making that an especially expensive way to reduce CO₂...
That was my point.The majority of Sheep &beef farms would be net carbon sinks .However the carbon sequestered is largely ignored while taxing animal outputs.Under new rules it is likely lime dug up/screened/transported 23km to my farm would be worse for the planet regarding co2 than phosphate mined in Morrocco, shipped around the world , had sulphuric acid added and transported 150 km from Napier .
go figure..
I agree that it shouldn't be exempt, but the counter argument isn't unreasonable: you can't (yet?) make many technoglocial adaptations to livestock to make them produce less methane, like you to can to many industrial processes to produce less CO₂. Also methane isn't really that easy to compare to CO₂. As livestock numbers have basically remained static for some time, and methane breaks down within about 20 years, there's is a stock of methane in the atmosphere and farmers are therefore not actually making marginal contributions to climate change.
No one can get their heads around this stuff. Burning fossil hydrocarbons is the base resource of the "economy". Taxing it will slow the economy, which is a good thing, as we are all drowning in a polluter rewarded fantasyland. Pointy headed shiny bums simply cannot grasp energy flow is the economy they cherish.
Biden exporting fossil fuel. Reminiscent of JA and JS shutting down further oil/gas exploration. Just exports the problem.
"The Biden administration on Thursday approved exports of liquefied natural gas from the Alaska liquefied natural gas (LNG) project, a document showed, prompting criticism from environmental groups over the approval of another “carbon bomb”."
https://www.theguardian.com/us-news/2023/apr/14/biden-alaska-lng-liquef…
https://www.reuters.com/markets/commodities/energy-crisis-fuels-coal-co…
Yep, she's all set for the great power up. :-)
https://learningenglish.voanews.com/a/europe-turns-to-firewood-during-e…
Sensible to liquify natural gas and ship it half-way around the world, when Russia had a pipeline into the back door. Whoops, sorry that got bombed. Makes you wonder who bombed the pipeline? Gas prices rose exponentially after the Nordstream pipeline was bombed, all for profit. Sick.
From CJames at KB today.
"Regional and local councils have done sea level rise predictions to limit coastal development. People have queried where they get their data from. The answers seem to be NIWA, leading back to IPCC. Well, a scientific paper has now been done on the detail of what they are basing their predictions on. And guess what? Most if not all of the level rises use come from the upper end prediction of RCP8.5. That is an extreme modelling scenario which IPCC has been forced to admit can’t happen. That little inconvenient fact hasn’t stopped the zombies though. The sea level rises predicted had no connection to the long term data that comes from the long term tidal gauges. These don’t even show an acceleration. That is something the global alarmist advocates try to gaslight the public on.
https://www.nature.com/articles/s43247-023-00703-x?utm_source=substack&utm_medium=email
So the maps used and the draconian requirements that councils want to force on people has no basis in science. Remember that next time the councils try to force retreat from the coasts.
Hat tip to Roger Roger Pielke Jr"
Really? I guess you have a great opportunity to by up all that cheap future tidal zone then.
"RCP2.6 is a scenario designed to keep global warming below 2°C. idealized case in which 2×CO2 forcing is kept constant until all fast and slow feedbacks are allowed to reach equilibrium. The answer we find is close to 10°C, for CO2 forcing alone. If we include the negative forcing by today’s aerosols, the response may be as low as 6-7°C, but ESS is ~10°C."
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/http://www.columbia.edu/~jeh1/mailings/2022/EarthEnergyImbalance.22Dece…
Go to the beach (been doing it for 60 years), no change. If it does miraculously change then perhaps one should move. All the 'experts' are good at is promoting fear, which they are paid to do. Can't wait for the 80-meter sea level rise, that puts my property right on the coast!
You are better than that fossil. That is a really dumb comment, with more than a veneer of climate denial, that you deny. 70 metres is an estimate of SLR if all ice on the planet melted, including Antarctica, which would take thousands of years. A 1 metre rise will do massive damage. That could possibly happen in my lifetime. Some of the beaches I visit have suffered severe erosion and retreat.
True but still using IPCC and why those specific reference dates?
Also "Where this data comes from Land Information New Zealand (New Zealand Hydrographic Authority); NIWA"
I'd now put a question mark next to data from NIWA, probably manipulated. NIWA is a hotbed of climate alarmists.
Yep. Need to take it up with whomever the Minister is after the election;
I just keep thinking of the waste of money in technical consultancy fees and plan changes that will be needed to fix the overestimates.
Do it now or pay more later. Everyone should read the full report and see what happens post 2030. Do the maths then, im convinced most NZers can't add and subtract though - especially those that want just native forests alone - they must have failed primmer 1 maths and stopped there.
A divy back to low income earners is very sensible and makes us richer boomers pay as we like to zip around on boats, planes etc and need reining in. I'm happy for it be harder for me to travel etc - are you?
If the objective is to get the greatest amount of CO2 out of the atmosphere in the shortest possible time, the fastest growing trees are the logical solution. Of course this path comes with all sorts of longer term downside. Personally I believe planting trees at the moment is just subsidising burners emissions. Trees need to be planted en mass for recovering our climate stability once we have reached net zero.
No, the objective should be to extract and burn as many fossil fuels as possible to enhance our quality of life. As hard as that is for you to comprehend. You want longer term downside and I want longer term upside. CO2 is good for the environment, net zero will sort itself out, it has for 5 billion years.
Morning fossil, you're up nice and early. Have you not heard of the concept "too much of a good thing"?
Remember when your mum gave you sweets, but told you not to eat too many and make yourself sick?
I'm guessing you were the kid who knew better, as sweets improved your "quality of life"? After a few years consuming more and more life improving sweets and needing to eat pureed food through the black stumps where your teeth used to be, your doctor tells you your life has improved so much your 150kg bulk needs regular jabs. Later yet, as you contemplate how sweets made for a great "quality of life" as you try to reach an itch on your leg stumps, you conclude yeah, I've never had it so good, thanks to the miracle of sweets.
If we don't act now, our children's quality of life will diminish. Start drilling, extracting, consuming. The more fossil fuels you consume, the higher quality of life. Period. Cleaner environment, less climate related deaths, cleaner water, life expectancy rise, everything is positive. Not only are fossil fuels addictive but they are good for us!
I can guarantee it will cost the poorest households over $10000 a year as the removal of transport access, removal of work access, and removal of medical access has severe costs to any vulnerable family. Then there is the added loss of life because of those things but the ecoableists don't care so long as they have their luxuries and are comparatively wealthy and able bodied it does not affect them... until a family member dies but chances are they won't even care then. Because a glowing characteristic of those pushing for these changes is a psychopathic lack of empathy and a disregard and abuse of those who are disabled or poor. Cue their reasoning devoid of any notion of human rights for those people.
It's really depressing reading this comments section, and seeing how many people are captivated by this cult-like global warming groupthink. Come on people, have a look at the alternative and more rational viewpoint.
Fake Invisible Catastrophes and Threat's of Doom by Patrick Moore
Any of the talks at the International Conference on Climate Change
Look at the couter arguments regarding CO2 and how it's having very little effect on the earth's temperature
Look at the declining predictions of CO2 sensitivity.
Join the dots. Cant you see that man made climate change is just nonsense.
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