Climate Change Response (Emissions Trading Reform) Amendment Bill

41 Sections 30GA and 30GB replaced

Replace sections 30GA and 30GB with:

30GA Regulations for auctions to sell New Zealand units

(1)

The Governor-General may, by Order in Council, make regulations recommended by the Minister under this section that prescribe matters relating to the powers of the Minister under section 6A to sell New Zealand units by auction.

(2)

If regulations are to be made under this section, the Minister must recommend the making of regulations that—

(a)

specify the date on which the sale of New Zealand units by auction commences:

(b)

prescribe an indicative schedule for when auctions are planned to be held:

(c)

specify circumstances in which an auction will not be held:

(d)

specify the format of an auction (for example, a single-round, sealed bid format):

(e)

specify rules for the format of the auction (for example, rules on how bids are made and how tied bids are resolved):

(f)

specify criteria, and requirements for registration, that a person must satisfy to participate in an auction:

(g)

specify financial processes that a person must follow when participating in an auction, including requirements for financial assurance, payment, and delivery:

(h)

provide for the results of each auction to be published.

(3)

If regulations are to be made under this section, the Minister may recommend the making of regulations for any or all of the following purposes:

(a)

providing for pilot auctions to be conducted, whether before or after the date on which auctions commence:

(b)

prescribing offences and penalties for the breach of regulations made under this section or section 30GD:

(c)

providing for any other matters for the conduct of an auction that the Minister considers relevant to the effective conduct of the auction.

30GB Regulations about overall limits and price control settings for units

(1)

The Governor-General may, by Order in Council, make regulations recommended by the Minister under this section.

(2)

If regulations are to be made under section 30GA, the Minister must recommend the making of regulations under this section that—

(a)

prescribe an overall limit on the sum of the following for a calendar year:

(i)

the number of New Zealand units sold by auction in that year (New Zealand units available by auction):

(ii)

the number of New Zealand units that are allocated for eligible activities, or provided to participants under negotiated greenhouse agreements, in that year (New Zealand units available by other means):

(iii)

the number of approved overseas units used by participants in that year by, for example, being transferred to holding accounts or being surrendered (approved overseas units available); and

(b)

provide that the overall limit—

(i)

restricts both the New Zealand units available by auction and the approved overseas units available, in that the following are prohibited to the extent that the overall limit would be exceeded:

(A)

the sale of New Zealand units by auction:

(B)

the use of approved overseas units by participants; but

(ii)

does not restrict the New Zealand units available by other means, in that New Zealand units may be allocated for eligible activities, or provided to participants under negotiated greenhouse agreements, even if the overall limit is exceeded; and

(c)

provide that any additional units that are allocated under section 86C(5)(b) are not counted as New Zealand units available by other means; and

(d)

provide for how a reserve amount of New Zealand units is to be released for sale at auction if a trigger price is reached or exceeded by bidding at an auction, unless the reserve amount and minimum price are set at zero under paragraph (e); and

(e)

prescribe the following price control settings:

(i)

the reserve amount of New Zealand units for each trigger price, which may be a single reserve amount of zero:

(ii)

the 1 or more trigger prices, unless the reserve amount is zero:

(iii)

the minimum price at which units may be sold by auction, which may be zero.

(3)

The Minister must recommend the making of regulations under this section so that,—

(a)

when the regulations are first made, they prescribe an overall limit and price control settings for each of the next 5 or 6 calendar years; and

(b)

the regulations are amended to ensure that, at all times, they prescribe an overall limit and price control settings for each of the next 5 calendar years.

(4)

Each time the Minister is to recommend that the regulations be amended to apply to a further calendar year under subsection (3)(b), the Minister—

(a)

must consider whether to recommend prescribing a new overall limit and new price control settings for each of the 2 calendar years before that further calendar year; and

(b)

may recommend prescribing a new overall limit and new price control settings for 1 or both of the 2 calendar years after the year in which the amendment is made.

(5)

However, the Minister may make a recommendation under subsection (4)(b) only if,—

(a)

in the year in which the amendment is made, the price control settings have had effect by—

(i)

the release of a reserve amount of units; or

(ii)

the sale of units at the minimum price; or

(b)

the Minister is satisfied that the amendment is justified by the following special circumstances:

(i)

a change that has significantly affected any matter that the Minister was required to consider under section 30GC when recommending the overall limit and price control settings that are to be amended; or

(ii)

a change in the budget or contribution described by section 30GC(2)(a) or (b) that applies to the year to which the amendment applies; or

(iii)

a force majeure event.

(6)

Regulations made under subsection (2)(a)(ii) may be made in respect of different units, transactions, persons, classes of units, subclasses of units, classes of transactions, or classes of persons.

(7)

See section 30GC for requirements relating to this section.

Example

Regulations are first made under this section in December 2019. They must prescribe the overall limits and price control settings for the 5 (or 6) years from 2020 to 2024 (or 2025). In 2020, the regulations—

  • must be amended to apply (or in how they apply) to 2025; and

  • may be amended to prescribe new overall limits and price control settings for 2023 and 2024; and

  • may be amended to prescribe new price control settings for 2021 or 2022.

30GC Requirements for regulations about overall limits and price control settings for units

(1)

The Minister must comply with this section in—

(a)

recommending under section 30GB(2), (3), or (4)(b) the making of regulations that prescribe overall limits or price control settings; and

(b)

considering under section 30GB(4)(a) whether to recommend prescribing new overall limits and price control settings for the 2 calendar years before a further calendar year.

(2)

The Minister must be satisfied that the overall limits and price control settings are in accordance with—

(a)

the relevant emissions budget; and

(b)

the relevant nationally determined contribution for New Zealand under the Paris Agreement.

(3)

However, they need not strictly accord with the budget or contribution as long as the Minister is satisfied that the discrepancy is justified, after considering the other matters under this section.

(4)

The Minister must consider—

(a)

the main matters; and

(c)

the additional matters, but only in relation to the price control settings.

(5)

The main matters are as follows:

(a)

the projected trends for New Zealand’s greenhouse gas emissions in the 5 years after the current year, including—

(i)

the anticipated volumes of greenhouse gas emissions to which the emissions trading scheme applies (meaning emissions for which participants are required to submit returns or surrender units under this Act); and

(ii)

the anticipated volumes of greenhouse gas emissions to which the emissions trading scheme does not apply:

(b)

the proper functioning of the emissions trading scheme:

(c)

international climate change obligations and instruments or contracts that New Zealand has with other jurisdictions to access emissions reductions in their carbon markets:

(d)

the forecast availability and cost of ways to reduce greenhouse gas emissions that may be needed for New Zealand to meet its targets for the reduction of emissions:

(e)

any recommendations of the Climate Change Commission that are made after an emissions budget is first set, including any desirable carbon price path (if available):

(f)

any other matters that the Minister considers relevant.

(6)

The additional matters are as follows:

(a)

the impact of emissions prices on households and the economy:

(b)

the level and trajectory of international emissions prices (including price controls in linked markets):

(c)

inflation.

(7)

If the Minister makes a recommendation about prescribing overall limits or price control settings that differs from any recommendation of the Climate Change Commission described by subsection (5)(e), the Minister must, as soon as is reasonably practicable, prepare a report of the reasons for the difference and—

(a)

present a copy of the report to the House of Representatives; and

(b)

publish the report.

(8)

If the Climate Change Commission exists and an emissions budget has been set,—

(a)

the Minister must request the recommendations of the Commission for the purpose of subsection (5)(e); and

(b)

the Commission’s recommendations must be made in accordance with the same requirements under section 30GB and this section that apply to the making of the Minister’s recommendations.

30GD Regulations for auction monitor

(1)

The Governor-General may, by Order in Council, make regulations recommended by the Minister under this section.

(2)

If regulations are made, or are to be made, under section 30GA, the Minister may recommend the making of regulations under this section for any or all of the following purposes:

(a)

prescribing a method or process by which the Minister may appoint a person as an auction monitor, which must—

(i)

require the person to be independent of any auction agents and any persons who are likely to be auction participants; and

(ii)

include as functions of the auction monitor—

(A)

validating auction results; and

(B)

publishing reports on the results of auctions:

(b)

specifying that the auction monitor’s functions include any of the following:

(i)

monitoring the conduct of any auction agents and auction participants:

(ii)

providing periodic assessments of the auction system and making recommendations for improvements:

(iii)

calculating additional specified metrics in respect of the auction process and auction results (such as bid volume statistics and relevant aggregate information):

(iv)

any other functions that the Minister considers are relevant to the effective conduct of the auction monitor’s role.

(3)

In this section and section 30GE,—

auction agent means any agent appointed under section 6A(b) to conduct an auction

auction monitor means a person appointed as an auction monitor under regulations recommended under subsection (2)(a)

auction participant means a potential buyer who participates in an auction.

30GE Sharing information with auction monitor

(1)

The purpose of this section is to facilitate the provision of information—

(a)

from the EPA, the Registrar, the chief executive, or any auction agent (a provider):

(b)

to the auction monitor (if appointed).

(2)

A provider must provide information to the auction monitor if the information—

(a)

is requested by the auction monitor; and

(b)

is required by the auction monitor to assist in carrying out its functions.

30GF Obligation of confidentiality on auction monitor

(1)

This section applies to the auction monitor (if appointed) while, and after, the auction monitor performs its functions or exercises its powers.

(2)

The auction monitor—

(a)

must keep confidential all information that comes into its knowledge when performing its functions or exercising its powers; and

(b)

must not disclose any of that information, except—

(i)

with the consent of the person to whom the information relates or to whom the information is confidential; or

(ii)

to the extent that the information is already in the public domain; or

(iii)

for the purposes of, or in connection with, the performance of its functions or the exercise of its powers; or

(iv)

as provided under this Act or any other Act; or

(v)

in connection with any investigation or inquiry (whether or not preliminary to any proceedings) in respect of, or any proceedings for, an offence against this Act or any other Act; or

(vi)

for the purpose of complying with international climate change obligations.

(3)

The auction monitor commits an offence under section 30GG if the auction monitor knowingly contravenes this section.

(4)

Nothing in subsection (2) may be treated as prohibiting the auction monitor from—

(a)

providing or publishing general information in relation to its functions; or

(b)

with the prior approval of the Minister, preparing statistical information and supplying it to any person in a form that does not identify any individual.

30GG Offence for breach of auction monitor’s obligation of confidentiality

An auction monitor who knowingly acts in contravention of section 30GF commits an offence and is liable on conviction to either or both of the following:

(a)

imprisonment for a term not exceeding 6 months:

(b)

a fine not exceeding $15,000.