Hon Paula Bennett
Minister for Climate Change Issues
26 May 2016
ETS one-for-two subsidy to be phased out
The Government is phasing out a subsidy in the Emissions Trading Scheme that allows some businesses to pay one emissions
unit for every two tonnes of pollution they emit, Climate Change Minister Paula Bennett says.
The one-for-two subsidy was a temporary measure introduced during the global financial crisis to help moderate the
initial costs of the ETS while businesses were struggling.
“The subsidy will be phased out over three years to give businesses time to plan and adjust, to support a more stable
market,” Mrs Bennett says.
“This is a significant step in helping New Zealand meet its ambitious target of reducing emissions to 30 per cent below
2005 levels by 2030. More importantly, it will support our efforts to grow a lower-emissions economy.”
The current 50 per cent unit cost will increase to 67 per cent from 1 January, then 83 per cent from 1 January 2018,
with all sectors in the ETS paying the full market price from 1 January 2019. The current price ceiling which caps units
at $25 will remain.
“It is time businesses move towards paying the market price of their emissions. Gradually removing the one-for-two
measure is a pragmatic and practical way for them to manage the costs,” Mrs Bennett says.
Removing the subsidy will positively impact the operating balance by $356 million over the next four years, based on a
New Zealand Unit price of $12.
Changes to the subsidy primarily affect ETS participants in the waste, transport, energy, electricity and industry
sectors, and importers of goods containing synthetic greenhouse gases.
Businesses exposed to international trade competition, and whose emissions are a big part of their costs, will continue
to receive an allocation of emissions units to protect their competitiveness.
ENDS