The New Zealand government announced on Tuesday draft changes to the emissions trading scheme (NZ ETS), including provisions that will help recognize carbon removal in the future, as well as changes to the climate change response act.
Among the draft NZ ETS proposal are changes in how the government reviews companies' industrial allowance allocations, which is aimed at reducing barriers for firms to invest in decarbonization projects.
The ETS settings decisions will become a biennial process going forward, instead of the current annual review, although this new rule will not affect the annual decision planned for 2026.
The government is also removing a provision within the country's climate change act that requires NZ ETS unit volumes and price control regulations to accord with the nationally determined contributions under the UN's Paris Agreement on climate change.
Changes to the operation of the ETS scheme include: adding the import of carbon dioxide in the NZ ETS; administrative changes to penalty repayment rules managed by the environmental protection authority; allowing flexibility for foresters to re-establish forests after significant disruptions such as severe weather events; and minor adjustments such as extending deadlines after major disruptions and allowing for discretion to waive ETS penalties in some instances.
The government has also been "exploring opportunities to recognize and reward non-forestry removals" and is "progressing work" on releasing an assessment framework for carbon removals which will guide developers on the scientific evidence needed to gain removals credits and clarify the pathway for crediting new activities in the ETS. It is also working to amend the climate change law to add "carbon removal activities" as an activity that can be recognized under the NZ ETS — although this change would not outright grant recognition but rather pave the path for this happening in the future, it said.
The government is also updating the guidance for the voluntary carbon markets in 2026 and stakeholders will be able to submit projects for assessment in the first half of 2026.
The New Zealand government said on 4 November it was making these changes to "ensure" the climate change law "is working well and as intended." These follow the completion of a review earlier this year.
It delayed the due date for government organizations to become carbon neutral to 2050, from 2025 which was "too soon" to meet this target. While buying offset credits could have been an alternative to achieve this, there are not enough such credits in the local market available to meet such demand, it said.
The Climate Change Commission will no longer be required to advise the government on emissions reduction plans (ERPs), although the commission will continue to provide advice on the five-yearly emissions budgets and the annual emissions reduction monitoring report — with the latter's timing brought forward to April, to align it with the timing of the annual release of emissions projections.
The new rules will also allow more flexibility on the process for amending or replacing ERPs and the related policies and strategies, by removing the requirement to consult on such changes.
The amendment bill to the climate change act will be submitted in 2026, although the change to remove the requirement for ETS settings to accord with NDCs will be adopted by the end of the current year, the government said. A separate amendment bill will also be introduced and adopted before the end of 2025 to bring recently announced updates to the 2050 biogenic methane target into law, it said.
