The Government’s 2023 review of the New Zealand Emissions Trading Scheme considered four options to reshape the ETS, including reducing the supply of units and separating incentives for gross emissions reductions and carbon removals.
The Taxpayers’ Union opposed all four options. We argue the ETS should remain a market-based mechanism focused on achieving New Zealand’s net emissions commitments at the lowest possible cost, rather than being manipulated to favour particular types of emissions reductions or discourage forestry. We also recommend removing the auction reserve price and cost containment reserve, which distort the market’s carbon price signal.
Further government intervention risks driving up costs for consumers and businesses, exposing taxpayers to potentially billions of dollars in liabilities, and undermining the ETS’s core price-discovery function. If the Government wants to pursue separate goals such as reducing gross emissions or limiting exotic forestry, it should use policies outside the ETS rather than weakening the market itself.
