Climate Change Response (Emissions Trading Reform) Amendment Bill

Climate Change Response (Emissions Trading Reform) Amendment Bill

Government Bill

186—2

As reported from the Environment Committee

Commentary

Recommendation

The Environment Committee has examined the Climate Change Response (Emissions Trading Reform) Amendment Bill and Supplementary Order Paper No 413. The committee recommends (by majority) that the bill be passed with the amendments shown.

Introduction

The New Zealand Emissions Trading Scheme (NZ ETS) was established in 2008, through amendments to the Climate Change Response Act 2002. This bill and supplementary order paper (SOP) would reform the NZ ETS by further amending the Climate Change Response Act.

The bill and SOP would:

  • update the purpose of the Climate Change Response Act to include the Paris Agreement, and remove redundant references to the Kyoto Protocol

  • enable a cap to be placed on emissions covered by the NZ ETS

  • provide for a cost containment reserve, rather than a fixed price option, to allow the Government to manage the supply of units in the NZ ETS

  • improve the process for the auctioning of units in the NZ ETS

  • allow for the phase-down of industrial allocation from 2021, with greater reductions from 2030

  • strengthen the compliance regime by introducing new infringement offences for low-level offending, restructuring the excess emissions penalty system, and making information about significant non-compliance publicly available

  • make more data publicly available about the emissions and removals of individual businesses

  • make a number of operational and technical improvements to the NZ ETS, particularly in the way it relates to forests

  • introduce averaging accounting to the NZ ETS for post-1989 forests

  • introduce a new “permanent forestry” activity into the NZ ETS, and disestablish the existing Permanent Forest Sink Initiative (PFSI) from the Forests Act 1949

  • give effect to decisions to price agricultural livestock emissions at farm level, and fertiliser emissions at processor level, from 2025, and provide a fall-back option if there is insufficient progress on an alternative pricing mechanism by 2022.

Proposed amendments

This commentary covers the main amendments we recommend (by majority) to the bill as introduced. They include:

  • introducing activity-specific reduction of the general phase-out rate

  • enabling more data collection

  • improving options for the backing of units

  • taking into consideration future emissions budgets and targets

  • clarifying the membership of the Climate Change Commission, and its reporting on industrial allocation

  • introducing advance notice of publication of emissions data

  • providing the possibility of voluntary reporting for agriculture before reporting became mandatory

  • providing the possibility of voluntary participation for farm-level agriculture

  • changing the commencement of many of the forestry-related policy changes

  • extending the timeframe for participants to opt in to averaging accounting, before averaging becomes mandatory for post-1989 forests

  • clarifying the penalties for permanent forestry non-compliance

  • improving the design of the pre-1990 offsetting regime

  • clarifying the rules and liabilities for transmissions of interest.

We do not discuss all minor, technical, or consequential amendments that are proposed.

Updating the purpose of the Act to include domestic emissions targets and budgets

Clause 7 of the bill would amend section 3 of the Act. It would update the Act’s purpose to include supporting New Zealand’s international obligations under the Paris Agreement. The Paris Agreement would be included in Schedule 2A of the Act.

We recommend amending clause 7 so that the purpose of the Act in section 3 includes assisting New Zealand to meet its 2050 target and emissions budgets, as set pursuant to the Act.

This would involve consequentially repealing existing parts of the purpose statement in section 3 that refer to reducing New Zealand’s net emissions of greenhouse gases to below business-as-usual levels.

Clarifying some matters following the Climate Change Response (Zero Carbon) Amendment Act 2019

This bill was introduced to the House before the passing of the Climate Change Response (Zero Carbon) Amendment Act 2019 (Zero Carbon Act). As a consequence of that Act, we propose some changes to this bill.

First, we recommend amending section 5D to provide that the membership of the Climate Change Commission would comprise a chairperson, deputy chairperson, and between three and seven other members (new clause 10A).

Sections 5ZG and 5ZI of the Act set out the process for the Minister to prepare and make emissions reduction plans publicly available. The Minister must make a plan publicly available 12 months before a period commences. We recommend amending section 5ZI to allow, for the first emissions budget period, the first emissions reduction plan to be published at any time before the first period commences. We recommend inserting clause 10E accordingly.

We recommend inserting clause 10F to require the Climate Change Commission’s report at the end of an emissions budget period to relate to the emissions budget period just completed. Our change would amend section 5ZL of the Act.

Under the bill’s proposed new section 84D (inserted by clause 77), the Climate Change Commission would be required to provide reports on the phase-out of industrial allocation. Those reports would need to be tabled in the House within 16 weeks after the end of an emissions budget period. We recommend amending the bill to instead provide that the general process for tabling and publishing the Commission’s reports would apply to its advice on regulations setting the phase-out rates for industrial allocation. The general process, as amended by the Zero Carbon Act, would require the reports to be tabled and published within 10 working days after being provided to the Minister. This process is set out in section 5L of the Act. We recommend inserting clause 10G, new section 5ZOB, to reflect this change.

To clarify, if a Minister were to make decisions that deviate from the recommendations in the Commission’s report, the bill would require the Minister to present a report to the House (within 16 weeks of receiving the Commission’s report) setting out the reasons for the deviation. We propose that these provisions be moved to new clause 77 of the bill, new sections 84C(4) and (5).

Treaty of Waitangi

Section 3A of the Act sets out the Crown’s responsibilities to give effect to the principles of the Treaty of Waitangi.

As mentioned, this bill was introduced to the House before the passing of the Zero Carbon Act. The Zero Carbon Act inserted paragraphs (ab), (ac), (ad), and (ae) into section 3A of the Act.

As introduced, clause 8 of the bill would amend section 3A of the Act, and the paragraphs referred to above would be repealed. This was unintentional.

We recommend amending clause 8 of the bill so that these provisions are not repealed from the Act.

Managing unit supply and price controls

The bill would introduce a limit on the supply of New Zealand units (NZUs) in the NZ ETS. This would enable a cap to be placed on total emissions allowed within the NZ ETS. NZUs could be sold through auctions, which would result in a dynamic emissions price. Unit supply would be announced on a rolling five-year basis.

There would also be price controls within the NZ ETS. The Government would have mechanisms to manage unacceptably low or high prices. For maximum prices, there is currently a $25 fixed price option for NZUs. The bill would replace this with a cost containment reserve, which would provide the Government with reserve units it could auction if the trigger price was reached.

Regulations for auctions to sell NZUs

Clause 41 would insert new section 30GA to update the provisions that allow for regulations to enable the sale of NZUs by auction. Regulations made under the new section would need to prescribe relevant matters, such as the timing, schedule, format, and rules for running auctions.

Clause 12 of the bill would amend section 6A of the Act to clarify the powers for the Minister for Climate Change to sell NZUs by auction under new section 30GA.

Clause 13 would amend section 7 of the Act to allow the Minister of Finance to direct the Registrar to transfer NZUs between holding accounts in certain circumstances (including for auctioning).

The majority of us think that also allowing the Minister for Climate Change to direct the transfer of units to holding accounts for auctioning purposes would improve the workability of the new auction system.

Therefore, we recommend amending clause 12 to enable the Minister for Climate Change to direct the Registrar to transfer any units to any holding account in the registry for the purpose of selling any units by auction.

Enabling a cap on emissions covered by the scheme

The bill would introduce a decision-making framework to enable the supply of units to be restricted, thus capping allowable emissions under the NZ ETS.

As mentioned above, new section 30GA would enable the Minister to make regulations for the auction of units.

Clause 41 of the bill would also insert new section 30GB into the Act. This would require the Minister, if making such regulations, to also make regulations prescribing an overall limit on the supply of units. This limit would have the effect of setting the cap on emissions under the scheme.

Under new section 30GB(2)(b)(ii), quantities of units that are allocated for free cannot be restricted.

In the bill as introduced, any units sold through the cost containment reserve would need to be backed by matching emission reductions, whereas industrial allocation units exceeding the cap would not.

The majority of us think that the obligation under section 30IA to obtain equivalent emission reductions to back cost containment reserve units should also apply to any free allocation that exceeds the cap in an emissions budget. We recommend amending new sections 30IA and 30GB accordingly.

Requirements for decisions on annual unit supply and price controls

The Minister would be required to consider a range of matters when making decisions each year on settings for unit supply and the price controls.

Considering the effects on future budgets and the 2050 target

New section 30GC(2) would require the Minister to be satisfied that their decisions accord with the relevant emissions budget and with New Zealand’s commitment under the Paris Agreement, although there is some discretion.

New section 30GC(2) is not intended to limit the Minister’s consideration to only the current emissions budget and the nationally determined contribution under the Paris Agreement. If it were, this could lead to short-term decision-making that slows down long-term emissions reductions.

We recommend that new section 30GC(2) be amended to specifically include the consideration of future emissions budgets set under the Act, as well as the 2050 target set under the Act.

Changing “carbon price path” to “emissions price path”

New section 30GC(5) would set out the “main matters” the Minister must consider when making certain decisions under new section 30GB.

As introduced, new section 30GC(5)(e) refers to “carbon price path”. We recommend changing this term to refer to “emissions price path” to ensure that the Climate Change Commission’s advice is not constrained in respect of the other greenhouse gases. We recommend that the wording throughout the bill be amended accordingly. For example, this is relevant to our proposed new section 5ZOA.

Backing auction reserve amounts with emissions reductions or removals

Under clause 44, new section 30IA, if the cost containment reserve were triggered, the Minister would be required to obtain emissions reductions to match any reserve units sold at auction. New section 30IA would require the Minister to ensure that greenhouse gas emissions are reduced, or removals are increased, by 1 tonne for each NZU sold as a reserve unit. The Minister would be required to “back” the units in such a way as soon as reasonably practicable after the end of the emissions budget period.

We recommend the following amendments:

  • As we discussed earlier, we recommend requiring any units allocated for free that result in the cap being exceeded to also be backed by equivalent emissions reductions or removals, in the same manner as reserve units. We recommend amending new subsection (1) accordingly.

  • The majority of us think that the Minister should be allowed to “back” reserve units sold through the cost containment reserve before the end of the budget period if desired, not just after the end of the emissions budget period. This would increase flexibility and allow better access to overseas carbon markets. We recommend amending new subsection (3) accordingly.

  • The majority of us think that reserve units auctioned through the cost containment reserve or units freely allocated should be “backed” only where they exceed the emissions budget. This would help preserve the net emissions budget while avoiding unnecessary cost for the Crown. We recommend amending subsection (1) accordingly.

  • We recommend making it clear that the emissions reductions or removals required to back the reserve can be obtained from outside the NZ ETS. We recommend amending subsection (2) accordingly.

Phase-out of industrial allocation

The bill would provide for the phasing out of industrial allocation. Industrial allocation was intended as a transitional measure in the NZ ETS, as the risk of “emissions leakage” was expected to reduce over time. There are provisions in the Act that would enable industrial allocation to start to be phased out, but they have not been used.

The current levels of allocation for emissions-intensive, trade-exposed activities have not changed since they were established in 2009. The current rates in the Act are set at 0.9 for highly emissions-intensive activities, and 0.6 for moderately emissions-intensive activities. The bill would amend sections 81 and 83 of the Act to implement a general phase-out of industrial allocation for all activities by reducing the levels each year from 2021. As introduced, the minimum phase-out rate would be: 0.01 per year from 2021 to 2030; 0.02 per year from 2031 to 2040; and 0.03 per year from 2041 to 2050. Rather than needing to be initiated by regulation, the reduction would happen automatically under the Act, unless the Minister regulates for a lower phase-down rate on the recommendation of the Climate Change Commission.

Regulations that may reduce the general phase-out rate after 2030

Clause 77 of the bill would insert new section 84A into the Act. This would allow the Minister to make regulations to reduce the rate of the phase-out that is set in the Act after 2030 across all activities to certain specified levels. As mentioned above, the Minister could only do this if the Climate Change Commission advised that there was an ongoing and substantial risk of emissions leakage. The emissions leakage could be in just one of the eligible activities, but any regulation made to reduce the general phase-out rate would have to apply to all eligible activities.

The majority of us think there should be greater flexibility, and that the Minister should instead be able to reduce the phase-out rate for a specific eligible industrial activity that was deemed at risk of emissions leakage, while maintaining or increasing the set phase-out rates for other eligible industrial activities.

This would mean industrial activities at less risk of emissions leakage would be phased out more quickly, and better consideration could be given to the risks as they relate to each industrial activity.

We recommend amending new section 84A accordingly.

Reviewing or changing allocative baselines

Each industrial activity that is emissions-intensive and trade-exposed has one or more allocative baselines prescribed in regulations. As introduced, the bill does not propose to review or change the allocative baselines; rather, the bill would change the rate of assistance provided to those industrial activities. We do not recommend any changes to the bill relating to allocative baselines. However, we recognise that in the future a review of allocative baselines could be desired, and better data would be required to carry out any review.

The regulations for allocative baselines are currently based on data from 2006 to 2009. There is a risk that the current baselines no longer reflect actual emissions intensities from the industrial activities.

Under section 161D of the Act, the Minister has powers to require firms to provide data for the purposes of determining the need for industrial allocation. Section 161E of the Act limits the data that can be sought to that from the financial years between 2006 and 2009.

We therefore recommend amending section 161E (clause 139 of the bill) so that the Minister could collect data from other years to assist in carrying out reviews of the NZ ETS under section 160.

ETS-wide operational improvements

The bill would make several changes to the compliance regime and operational aspects of the NZ ETS. This would include the replacement of the excess emissions penalty system with new penalties, provision for new infringement offences, and publication requirements. We discuss some of these below.

New infringement regime for low-level offending

Strict liability offences

Clause 46 of the bill would insert new sections 30L to 30V into the Act, to introduce a regime for the creation of new infringement offences for low-level offending. Infringement offences (with strict liability) could be created by the Minister through regulation.

We recommend the bill be amended to ensure that the strict liability infringement offences made by regulations under the Act do not include reference to mental culpability (such as “without reasonable care”), as such wording would not be consistent with strict liability. Accordingly, we recommend amending clause 46, new section 30M. We note that strict liability offences do allow for instances where there is an absolute lack of fault.

Procedure for regulations about infringement offences

The Regulations Review Committee wrote to us about new section 30N(4) which sets out the procedure for making regulations about infringement offences. New section 30N(4) provides that failure by the Minister to consult with certain persons would not affect the validity of the regulations about infringement offences.

The ministries advised us that the wording is copied from existing sections of the Act, and is designed to prevent an attack on the validity of the regulations due to a minor or technical error in consultation. We were told that such a provision does not generally protect against a deliberate decision not to consult in accordance with a statutory obligation. As the provision in the bill does not involve a change in intent, and for consistency throughout the Act, we do not recommend changing the wording.

We recommend inserting clause 8A, new section 3B to consolidate in one place the procedures for consultation when making various regulations.

Replacing the excess emissions penalty system

The excess emissions penalty system is the current penalty system that applies when a person fails to surrender or repay units. New sections 134 to 134D would restructure this penalty into two new types of penalties: the surrender/repayment penalty (new section 134), and the reporting penalties (new sections 134A to 134D). A surrender/repayment penalty would apply if a person failed to pay units by a due date. Reporting penalties would cover situations where there is non-reporting or an error in a report, and would be determined based on the Environmental Protection Authority (EPA) assessing the person’s culpability.

Comment on penalty design

We were advised that the Ministry of Justice was consulted in the development of proposals to replace the excess emissions penalty system. Penalty regimes in which determinations of guilt are made by non-judicial bodies are highly irregular and should be strongly discouraged. An exception to this is the taxation model.

The Ministry for the Environment advised us that the taxation model is what the reporting penalty regime is modelled on. It also advised that, on balance, it recommends this approach, as proposed in the bill. It said that the NZ ETS penalty regime should be aligned with the tax system because of the scale, complexity, and self-reporting nature of the NZ ETS, and the high public interest in accuracy.

Additional information on the culpability factors in the proposed new reporting penalties would be beneficial for participants. We understand work on this can be progressed outside the legislation.

We were advised that the Government is considering the impact of the surrender/repayment penalty on smaller forestry participants.

Clarifying the $1,000 penalty in certain circumstances

New sections 134A to 134D would impose a $1,000 reporting penalty for inaccurate reporting that results in an under-claim of an allocation or entitlement, or an overstatement of emissions. This is to encourage accurate reporting. In those situations, we consider that the penalty should instead be calculated using the formula as proposed in the bill, and only then have a $1,000 maximum applied.

We recommend amending new sections 134A to 134D accordingly.

We note that if reporting were to result in an over-claim of an allocation or entitlement, no maximum amount would apply to the penalty. If there were no change in the person’s liability or entitlement, then no penalty should apply.

Time bar for amendment of returns

Late emissions returns would be allowed under new section 134. New section 127 would impose a time bar for the EPA to correct emissions returns. The time bar would prevent the EPA from correcting a return that covered an obligation to surrender or receive units for a period earlier than certain dates set out in the section.

However, as introduced, the EPA would be prevented from correcting historic non-compliance if the participant had submitted a late return. This is because the time bar for correcting returns is based on the time period that the obligation relates to, not the date the return was submitted.

We recommend clarifying that the time bar for amending emissions returns under new section 127 would not prevent the EPA from amending a late return submitted under new section 134A. The time bar would apply from when the return was actually submitted rather than when it was due.

We recommend that this change be extended to new section 91A, so that the EPA could also correct approvals of unique emissions factors. Otherwise, it is possible that the EPA would be prevented from correcting returns that were based on incorrect unique emissions factors.

Enactment date for penalties

We recommend that the new penalties regime should apply from 1 January 2021, rather than the enactment date of the bill. This would ensure that the regime aligns with the reporting years and allow sufficient time for preparation. We recommend amending clause 2 of the bill accordingly.

Transitional provisions for farm-level participants’ surrender obligations

SOP No 413 provides that farm-level participants would not face penalties for failure to comply with surrender obligations in the first year the obligations are due.

The majority of us note that the policy intent is for no financial enforcement mechanisms to apply in the first year of surrender obligations for farm-level participants. The majority of us therefore think it should be made clear that the new infringement offences and reporting penalties would also not apply in the first year for farm-level participants. We recommend reflecting this in our proposed new clause 223N, by amending section 217 of the Act.

Notices given to participants and compliance due dates

As discussed earlier, the bill would introduce a new infringement and compliance regime. As part of this, it would set various timeframes and deadlines for notices and payments.

One of these timeframes is for the period from when the Environmental Protection Authority notifies a person of their failure to submit an emissions return (or an annual or closing allocation adjustment) by the due date, and the time that subsequent penalties would apply. Under proposed new sections 134A and 134B, the notice period for this would be 10 working days. We think this should be extended to 20 working days, to give people more time to provide accurate information.

We recommend that this change be reflected in our proposed new clause 223E.

Publication of participants’ non-compliance

As introduced in clause 86(3) (which we propose to move to new clause 223), amendments to section 89 of the Act would require the EPA to publish serious cases of individual non-compliance. Publication would include relevant details relating to the non-compliance, including the account holder’s name, penalty type, penalty amount, due date, and payment date.

What types of non-compliance would be published

We consider that there would be benefit in clarifying what constitutes significant non-compliance that would be subject to publication under the amendments to section 89. As introduced, the bill would require penalties at culpability levels of “grossly careless” and “knowing” to be published. Simply not taking “reasonable care” would not result in publication. However, we understand that more information could be provided to participants outside the legislation so that there is a better understanding of the culpability bands.

New permanent forestry penalties

The bill would enable permanent forests (that are post-1989 forests) to be registered as a permanent forest under the NZ ETS, where the participant commits to remain in the NZ ETS for 50 years.

Under new sections 194EF and 194EI, the bill would also establish two new penalties for non-compliance with the requirements for permanent forests (relating to clear-felling and deforestation). The maximum penalties and defences would be set out in the Act and regulations. However, the amount of any penalty applied would be determined by the court.

Under the bill as introduced, the EPA would not report details about individual penalties for non-compliance with permanent forestry requirements. That is, those penalties would not be covered by the new section 89 provisions for publication.

We think that, for consistency, new permanent forestry penalties should be covered by the section 89 publication provisions. We recommend inserting clause 223ZF into the bill to reflect this.

Consolidated groups

We recommend that members of a consolidated group should also be liable for penalties and interest imposed on the group. We recommend amending clause 126 by inserting new section 153(5B) accordingly.

Publication of participant-level emissions and removals data

Under current law, the EPA publishes emissions and removals data at an aggregated level by sector and activity. It does not publish emissions and removals data at the participant level, for confidentiality reasons. However, participants’ names and addresses are publicly available on the New Zealand Emissions Trading Register.

Under clause 87 of the bill, new section 89A would require the EPA to publish participant-level emissions and removals data each year.

We think participants should get advance notice of publication. We propose that the EPA should be required to publish (on its website) the intended publication date of emissions and removals data no less than 10 working days before publication. We recommend inserting section 89A(4) accordingly.

Additionally, we recommend some minor changes to clarify the provisions:

  • The EPA should still publish emissions returns in cases where it creates a default assessment or amended return. In the bill as introduced, the EPA would simply have to “receive” a return.

  • The reporting should be able to be broken down by participant and by activity if the return relates to more than one participant or activity.

  • The EPA should be able to report NZ ETS participants’ emissions and removals in tonnes of carbon dioxide equivalent, and forestry participants’ net emissions and net removals in tonnes of carbon dioxide equivalent.

We recommend amending new section 89A accordingly.

Consequential changes to the Income Tax Act 2007

The bill would introduce a new permanent forestry category to replace the Permanent Forest Sink Initiative. It has been identified that these proposed changes in the bill as introduced would require some consequential amendments to the Income Tax Act 2007. We recommend amending Schedules 3 and 4 of the bill accordingly.

Animal and fertiliser emissions

Animal emissions—reporting and surrender obligations

Under the bill and SOP 413 as introduced, sections 2A and 2C of the Act would be amended to introduce mandatory reporting and unit surrender obligations under the NZ ETS for agricultural farmers undertaking activities outlined in subpart 4 of Part 5 of Schedule 3 of the Act (being persons who farm, raise, grow, or keep ruminant animals, pigs, horses, or poultry).

Under the SOP, the first year for farm-level mandatory reporting would commence from 1 January 2024, with returns due to the EPA by 31 March 2025. The first year for farm-level unit surrender obligations would commence from 1 January 2025, with returns due to the EPA by 31 March 2026. However, both of those dates could be deferred by Order in Council.

Since 2011, mandatory reporting obligations exist for agricultural animal processors, including dairy factories, abattoirs, and live animal exporters. Agricultural animal processors would cease reporting in the NZ ETS when farm-level participants face unit surrender obligations from 2025 (unless deferred by Order in Council). The bill would continue to allow the introduction of surrender obligations for agricultural animal processors. Under the Act, agricultural animal processors could be subject to surrender obligations if an Order in Council was made requiring this.

Interim measure for voluntary reporting and participation

We think it could be beneficial to encourage voluntary farm-level reporting and participation prior to mandatory reporting and participation.

We propose allowing regulations to be set to enable voluntary farm-level reporting for animal or fertiliser emissions. We also propose allowing for regulations to be made to enable voluntary farm-level participation (such as reporting allocations and surrender obligations) for animal or fertiliser activities.

We recommend inserting clause 186B, new section 216 accordingly.

Allocation applications for eligible agricultural activities—netting off

The SOP would insert new sections 86BAA and 86BB into the Act. The intention is for agricultural allocations to be calculated at the same time as unit surrenders, so that a net surrender return is determined. However, as introduced, there would be no specific requirement for the applications for allocations and emissions returns to be calculated at the same time. It is considered unlikely that there would be an overall net positive allocation in these circumstances. We recommend amending new section 86BAA to make it clear that the EPA could not make decisions on allocation applications (for eligible agricultural activities) until an emissions return was also submitted.

We also recommend amending new section 86BB to make it clear that an application for allocation could not satisfy the entire surrender obligation.

We recommend amending new clause 81 new sections 86BAA and 86BB, accordingly.

Review of progress on the Primary Sector Climate Change Commitments by the Climate Change Commission

The SOP would set out the primary sector climate change commitments as new Schedule 5 to the Act. It would also introduce a requirement for the Climate Change Commission to report on the progress toward the primary sector climate change commitments (set out in new Schedule 5) by June 2022.

If the Government considered that insufficient progress (through the Joint Action Plan on Primary Sector Emissions, known as He Waka Eke Noa) was made towards animals-farmer participants being ready to start complying with reporting and surrender obligations under the Act, the Minister for Climate Change, in consultation with the Minister of Agriculture, could choose to make an order under new section 219 to start processor-level pricing by recommending surrender obligations for agriculture in the NZ ETS earlier than 2025.

The current wording in new Schedule 5 would require the He Waka Eke Noa Steering Group to “approve” farm-level emissions reporting methods and definitions. We recommend changing “approved” to “accepted”, as it is not intended that an extensive approval process would be undertaken. Rather, it is expected that known and reliable methods and definitions for New Zealand farms would be published.

The He Waka Eke Noa progress report by the Climate Change Commission would cover both animal emissions and fertiliser emissions. The rationale for including fertiliser emissions is to keep animal and fertiliser emissions pricing in step, to send a consistent price signal. Therefore, we consider that the order-making power that would be created under new section 219 should include fertiliser emissions, as well as animal emissions. We recommend amending new sections 219(1) and 2A(5) accordingly.

Forestry

Extending the implementation date for 14 policy changes

The bill as introduced provides that averaging accounting for newly registered post-1989 forests would become mandatory from 1 January 2021. The bill would also introduce a new permanent forestry category within the NZ ETS to replace the Permanent Forest Sink Initiative (PFSI).

The above changes would require significant amendments to the Climate Change (Forestry Sector) Regulations 2008 to provide operational details.

Many of the new regimes in the bill as introduced would commence from 1 January 2021. We have been advised that more time is needed to develop these regulations. We recommend deferring the implementation dates for 14 forestry policy changes to 1 January 2022. Those 14 policy changes are:

  • introducing mandatory averaging accounting for newly registered standard post-1989 forests

  • introducing a new permanent forestry category within the NZ ETS

  • specifying that participants with standard post-1989 forests subject to averaging and permanent forestry will not be required to surrender units for emissions liabilities from temporary adverse events, as long as the forest is replanted

  • allowing post-1989 standard forestry participants using averaging accounting to offset their deforestation liability by planting an equivalent forest elsewhere

  • improving the design of offsetting for pre-1990 forests to allow greater flexibility of land use

  • simplifying and standardising the types of emissions returns participants need to submit for post-1989 forests

  • simplifying the process to access exemptions from deforestation liabilities for areas of tree weeds, and excluding post-1989 land predominantly containing tree weeds, from the ETS

  • allowing deregistration of persistently non-compliant post-1989 standard forestry participants

  • improving and enabling enforcement of the transmission of interest process for transferring registered post-1989 land between parties (for example, when buying and selling land)

  • allowing participants to reconfigure carbon accounting areas without having to surrender their full unit balance at the time of reconfiguration

  • clarifying how emissions or removals from all forest land (including forest land with mixed ages) in a carbon accounting area are to be included in an emissions return

  • clarifying what happens if a transmission of interest has occurred but the transmission process is not completed before a mandatory emissions return is due

  • requiring that all post-1989 forestry participants’ emissions returns must be net of any unit repayments/surrender obligations they may have for the activity being reported on the relevant land (that is, either standard post-1989 forestry or permanent forestry, which are reported separately)

  • clarifying obligations around the deregistration of post-1989 forest boundaries.

We recommend amending the bill accordingly.

Amendments resulting from the change of implementation date for averaging accounting and related provisions

Extending the option to use either averaging accounting or stock change accounting to forests that apply to register in 2021

As introduced, the bill would require mandatory averaging accounting for post-1989 forests registering in the NZ ETS from 2021. As a transitional measure, the bill would enable participants for post-1989 forests who are registered in the NZ ETS in 2019 and 2020 to choose whether to move to averaging accounting, or continue with stock change accounting. As introduced, this was provided for in new clauses 23 to 26 of Schedule 1AA (clause 202 of the bill). We note we have proposed moving these provisions to new clauses 31 to 35 of Schedule 1AA (clause 223ZZ of the bill).

We recommend extending the option for NZ ETS post-1989 standard forestry participants to use either averaging accounting or stock change accounting if they apply to register by 31 December 2021 (and have been registered by 30 June 2022), in addition to those registered in 2019 and 2020.

We recommend inserting new clauses 31 and 32 into Schedule 1AA of the Act accordingly.

Changing the Permanent Forest Sink Initiative notification period

Under proposed new clauses 20 and 21 of Schedule 1AA of the Act (which we propose moving to new clause 29 of Schedule 1AA), PFSI participants would be required to inform the EPA in 2021 of their decision whether to move into the NZ ETS or leave carbon forestry. Without any notification, there would be a mandatory transfer into the permanent forestry category in the NZ ETS on 1 January 2022. We recommend amending the bill to:

  • require participants to inform the EPA of their decision to move into the NZ ETS or leave carbon farming, by the end of 2022

  • require a mandatory transfer of any remaining PFSI forests to permanent forestry on 1 January 2023, under new clause 29 of Schedule 1AA of the Act.

  • make consequential amendments so the repeal of the PFSI under the Forests Act 1949 would take effect on 1 January 2023 (as set out in Schedule 6 of the bill).

Clarifying the start of the deforestation stand-down period

The bill would introduce an empowering provision for a stand-down period during which land previously forested must have remained deforested to qualify as a first rotation forest. As introduced, new section 194FD provides that the stand-down period could not take into account any deforestation that took place prior to Royal assent.

We recommend amending new section 194FD to specify that the stand-down period would not consider deforestation that occurs prior to 1 January 2021. On balance, we believe this would provide greater operational clarity.

Three forestry provisions that should be implemented on 1 January 2021

As introduced, the following three provisions would come into effect on the commencement date. We recommend that the bill be amended to provide for these provisions to commence on 1 January 2021:

  • proposed amendments to section 181—which would clarify when pre-1990 forest land is considered to be deforested

  • proposed amendments to section 192—which would make the transfer of NZ ETS participation over post-1989 forest land (when a forestry right or lease is granted) optional

  • proposed amendments to section 179—which would clarify that cleared land re-established in forest by a combination of planting and natural regeneration is not considered deforesting.

Permanent forestry

New permanent forestry activity in the NZ ETS

To lower the risk of over- or under-crediting a participant, we recommend that:

  • PFSI covenant holders who wish to transition some of their forest into post-1989 forestry and some into permanent forestry should be able to subdivide it into a number of carbon accounting areas after calculating the unit balance for the forest, but before completing the registration into the ETS forestry activities.

  • Forests moving from the PFSI into post-1989 forestry under averaging would surrender units for the difference between a higher current carbon stock and the average for that forest type.

Compliance for clear-fell harvest and deforestation

In the bill as introduced, forests registered as permanent forestry would not be permitted to be clear-fell harvested or deforested for 50 years. Any excess clear-fell would be subject to penalties based on the timber value.

We think it needs to be clearer how the penalties would be calculated. Therefore, we recommend proceeding with new sections 194EE to 194EI, but specifying in section 194EF(4) that the maximum penalty for non-compliant harvesting of permanent forestry would be equal to the value of 30% of the timber found in a fully stocked hectare.

Supporting provisions for forests using averaging and permanent forestry

Carbon equivalent forest land swaps for post-1989 forests using averaging

We recommend that, throughout the bill, post-1989 Carbon Equivalent Forest Land Swaps (CEFLS) be renamed as “P89 offsetting”, with consequential changes. We consider that “offsetting” is the more widely used terminology for this process, is more clearly identifiable, and also reflects the number of conceptual similarities to pre-1990 offsetting.

Supporting forestry operational improvements

Improving the process for offsetting pre-1990 forests

The bill would make changes to the offsetting process for pre-1990 forests, and provide more flexibility for forest owners.

We recommend amending the bill to:

  • align the eligibility criteria for non-forest land to be included in the offset application between post-1989 and pre-1990 offsetting

  • allow established eligible forest land to be added to an existing application

  • redraft the new sections of the bill relating to pre-1990 offsetting to correct process issues.

We recommend sections 186A to 186J of the Act be replaced by new sections 186AA to 186FC accordingly.

Ability to deregister a participant for persistent non-compliance

The bill would enable the EPA to deregister standard post-1989 forestry participants who are persistently non-compliant in meeting their obligations. New section 57(4)(bb) would allow the EPA to consider any previous non-compliance with outstanding obligations, and to not be required to register the applicant as a participant.

As introduced, the new section could be construed as incorporating any persistent non-compliance in the ETS, in areas other than post-1989 forest land.

We propose amending the bill to ensure that a person who has been deregistered for persistent non-compliance would not be registered as a participant in respect of either standard post-1989 or permanent forestry, if they have not met outstanding obligations from a previous registration in post-1989 forestry.

We recommend inserting new clause 223W to amend new section 57(4)(bb) accordingly.

Transmission of interest

Clauses 175, 176, and 178 would amend the Act to set out processes for the transmission of interests in post-1989 forest land. The provisions in the bill would address single non-compliant transmissions of interest. However, where there are multiple non-compliant transmissions of interest, there could be significant costs for the Crown.

We recommend amending the bill to require the EPA to impose any stock change liability or entitlements on the most recent transferee, where there have been multiple non-compliant transmissions of interest. We were advised that information contained in the notice of each title is going to be improved, so that participants will have better information when conducting due diligence prior to purchase.

We recommend inserting new sections 194AA to 194AC accordingly.

We also recommend ensuring that estate administrators can act on behalf of each deceased participant separately. We recommend amending new section 192 accordingly.

Powers to make forestry regulations—best practice forest management

Under new section 168(1)(nc), inserted by clause 144, a new regulation-making power would be created to determine the meaning of “best practice forest management” in the context of section 179A of the Act. Currently, the definition is determined by administrative policy, whereas the bill would require it to be provided for in regulations.

The Regulations Review Committee queried whether the definition should instead be stipulated in the Act. We were advised that the definition would need to apply to a broad set of circumstances that are expected to undergo continual change due to the changing nature of forest management.

We propose that the regulations about best practice forest management (in the context of section 179A) be added to the regulations that must be consulted on. To do this, we recommend amending clause 144 to insert new section 168(3). We note we have also recommended that consultation requirements are consolidated into new section 3B, which we discussed earlier.

Powers to make forestry regulations—retrospective regulations for averaging

As introduced, new section 194LA would allow regulations to be made about averaging methodology. We note that we propose separating that proposed section into new sections 194LA and 194FE. Subsection (3) of each new section would allow these regulations to have limited retrospective effect:

  • A regulation could apply from the commencement of the mandatory emissions return period (MERP) in which the regulation is made or from a later date in that period.

  • A regulation made under subsection 194FE(1)(d)(i), which is about prescribing the stand-down period after deforestation before a new forest may be considered a first rotation forest, may prescribe a stand-down period that begins before the regulation is made.

The Regulations Review Committee queried this retrospectivity.

It is not intended that the retrospectivity could apply to participants that have already registered into the NZ ETS. Therefore, we recommend clarifying that a change in the stand-down period made under new section 194FE(3)(b) would not extend to forests already registered in the NZ ETS as a first rotation forest. We recommend inserting new section 194FE(4) so that any changes to regulations to increase the stand-down period would not apply retrospectively to change the stand-down period for land already registered.

New Zealand National Party minority view

This bill was introduced to the House in October 2019 at a time when the COVID-19 crisis confronting the world could not have been contemplated.

At first reading the bill had significant and important policy details yet to be included. Those policy gaps were filled by way of the Minister’s SOP 413 during the select committee’s process, but many of the specific policy aspects were not finalised until very late in the committee’s work on the bill.

This is a long, complex, multifaceted, administratively complicated bill that upon enactment will have widespread and costly implications for every sector of the New Zealand economy.

Much of the Environment Committee’s work on the bill has been conducted in the shadow of COVID-19 but without consideration of or reference to it.

National members objected to the bill being advanced during the COVID-19 adjournment of Parliament. We do not believe the committee has had an adequate or sufficiently robust opportunity to conduct a full and detailed analysis of the bill’s impacts let alone upon a post-COVID-19 domestic and global economic environment.

National members are concerned that this bill will add further cost, uncertainty and inhibitors to economic recovery at a time when we are facing the greatest economic challenge of our lifetime.

The National Party believes that progressing a bill that significantly increases the cost of living at a time when we are unable to even begin to quantify the negative impact of COVID-19 on the New Zealand economy is irresponsible.

National opposes this bill proceeding at present. Instead, we propose that the passage of this bill be postponed for 12 months when we will have more certainty around the economic position New Zealand will be in post-COVID-19. Consideration in terms of the impacts of the bill’s enactment in light of COVID-19 could take place while at the same time providing an opportunity for a more detailed and robust analysis of the climate change policy tools the bill seeks to implement.

Appendix

Committee process

The Climate Change Response (Emissions Trading Reform) Amendment Bill was referred to the committee on 5 November 2019. The closing date for submissions was 17 January 2020. We received and considered 171 submissions from interested groups and individuals. We heard oral evidence from 62 submitters at hearings in Auckland and Wellington.

We received advice from the Ministry for the Environment, the Ministry for Primary Industries, and Te Uru Rākau (Forestry New Zealand).

The Regulations Review Committee reported to the committee on the powers contained in the bill and Supplementary Order Paper No 413.

Committee membership

Dr Duncan Webb (Chairperson)

Dr Liz Craig

Hon Jacqui Dean (from 19 February 2020)

Sarah Dowie (until 19 February 2020)

Hon Nathan Guy

Jenny Marcroft

Hon Scott Simpson

Erica Stanford

Chlӧe Swarbrick

Angie Warren-Clark

Key to symbols used

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Hover your cursor over an amendment for information about that amendment. Download the PDF version to see this information in a form that can be printed out.

Hon James Shaw

Climate Change Response (Emissions Trading Reform) Amendment Bill

Government Bill

186—2

Contents

Commentary
Key
1Title
2Commencement
3Principal Act
4Section 2A amended (Application of Schedules 3 and 4)
5Section 2B amended (Orders in Council in relation to Part 5 of Schedule 3)
6Section 2C amended (Effect of Orders in Council in relation to Part 5 of Schedule 3)
5Sections 2B and 2C replaced
2BOrders in Council in relation to subparts 2 and 4 of Part 5 of Schedule 3 (Agriculture)
2CEffect of overlapping application of subparts of Part 5 of Schedule 3 (Agriculture)
7Section 3 amended (Purpose)
8Section 3A amended (Treaty of Waitangi (Te Tiriti o Waitangi))
8Section 3A amended (Treaty of Waitangi (Te Tiriti o Waitangi))
8ANew section 3B inserted (Consultation about certain regulations, orders, and notices)
3BConsultation about certain regulations, orders, and notices
9Section 4 amended (Interpretation)
10New sections 4A and 4B inserted section 4AA inserted (Greenhouse gas definition may be amended to add gases)
4A4AAGreenhouse gas definition may be amended to add gases
4BTransitional, savings, and related provisions
10ASection 5D amended (Membership of Commission)
10BSection 5J amended (Commission’s functions)
10CSection 5N amended (Consultation)
10DSection 5ZG amended (Requirement for emissions reduction plan)
10ESection 5ZI amended (Minister to prepare and make emissions reduction plan publicly available)
10FSection 5ZL amended (Commission to report at end of emissions budget period)
10GNew subpart 6 of Part 1B inserted
5ZOARecommendations about limits and price control settings for units
5ZOBRecommendations about decreased or increased phase-out rates
11Section 6 amended (Minister of Finance may direct Registrar regarding establishment of Crown holding accounts and carry out trading activities with respect to units)
12Section 6A amended (Minister’s power to sell by auction)
13Section 7 amended (Minister of Finance may give directions to Registrar regarding accounts and units)
14Section 9 amended (Minister of Finance may obtain information from inventory agency and Registrar)
15Section 10 replaced (Purpose of Registry)
10Purpose of Registry
16Section 13 amended (Registrar may refuse access to, or suspend operation of, Registry)
17Section 14 amended (Registrar must give effect to directions)
18Section 15 amended (Registrar to allocate unique numbers)
19Sections 16 and 17 repealed
20Section 18 amended (Form and content of unit register)
21Section 18B amended (Closing holding accounts)
22Section 18C amended (Transfer of units)
23Section 18CA amended (Effect of surrender, retirement, cancellation, and conversion)
23Section 18CA replaced (Effect of surrender, retirement, cancellation, and conversion)
18CAEffect of surrender and cancellation
24Sections 18CB, 18CC, and 18CD repealed
25Section 18D amended (Succession)
26Section 19 repealed (Retirement of Kyoto units by the Crown)
27Section 20 amended (Transactions must be registered)
28Section 21 repealed (Registration procedure for Kyoto units)
29Section 21AA amended (Registration procedure for New Zealand units and approved overseas units)
30Section 21A amended (Electronic registration)
31Section 21B amended (Defective applications)
32Section 23 repealed (Receiving Kyoto units from overseas registries)
33Section 23A amended (Receiving New Zealand units and approved overseas units from overseas registries)
34Section 24 amended (Priority of registration)
35Section 25 amended (Correction of unit register)
36Section 27 amended (Information accessible by search)
37Section 30A amended (The Crown or Registrar not liable in relation to searches in certain cases)
38Sections 30B to 30D and cross-heading repealed
39Section 30E repealed (Conversion of New Zealand units into designated assigned amount units for sale overseas or cancellation)
40Section 30G amended (Regulations relating to Part 2)
41Sections 30GA and 30GB to 30H replaced
30GARegulations for auctions to sell New Zealand units
30GBRegulations about overall limits and price control settings for units
30GCRequirements for regulations about overall limits and price control settings for units
30GDRegulations for auction monitor
30GESharing information with auction monitor
30GFObligation of confidentiality on auction monitor
30GGOffence for breach of auction monitor’s obligation of confidentiality
30HConsultation and commencement for certain regulations about units and auctions
42Section 30H amended (Procedure for certain regulations relating to units)
43Section 30I amended (Incorporation by reference in regulations made under section 30G)
44New section 30IA inserted (Minister must obtain emission reductions to match reserve amounts of units released)
30IAMinister must obtain emission reductions to match reserve amounts of units released
44New section 30IA inserted (Minister must obtain greenhouse gas reductions to match certain excess units)
30IAMinister must obtain greenhouse gas reductions to match certain excess units
45Section 30J amended (Signing false declaration with respect to regulations made under section 30G)
46New subparts 3 and 4 subpart 3 of Part 2 inserted
30LMeaning of infringement offence and infringement fee
30MRegulations about infringement offences
30NProcedure for regulations about infringement offences
30NConsultation and commencement for regulations about infringement offences
30OProceedings for infringement offences
30PAppointment of enforcement officers
30QWhen infringement notice may be issued
30RInfringement notice may be revoked
30SWhat infringement notice must contain
30THow infringement notice may be served
30UPayment of infringement fees
30VReminder notices
30WRegulations setting price of carbon
47Section 31 amended (Meaning of greenhouse gas)
48Section 32 amended (Primary functions of inventory agency)
49Section 35 amended (Publication)
50Section 36 amended (Authorisation of inspectors)
50ASection 48 amended (Signing false declaration in respect of regulations made under section 50)
51Section 49 amended (Reporting)
52Section 50 amended (Regulations)
53Section 51 amended (Incorporation by reference in regulations made under section 50)
54Section 52 amended (Inventory agency must report to Minister on certain matters before certain regulations are made)
55Section 53 repealed (Consequential amendments)
56Section 54 amended (Participants)
57Section 55 amended (Associated persons)
58Section 56 amended (Registration as participant in respect of activities listed in Schedule 3)
59Section 57 amended (Applicant to be registered as participant in respect of activities listed in Schedule 4)
60Section 58 amended (Removal from register of participants in respect of activities listed in Schedule 4)
61Section 59 amended (Removal from register of participants in respect of activities listed in Schedules 3 and 4)
62New sections 59A and 59B inserted section 59B inserted (Removal from register if participant never carried out activity)
59ARemoval from register for persistent non-compliance (standard forestry participants only)
59BRemoval from register if participant never carried out activity
63Section 60 amended (Exemptions in respect of activities listed in Schedule 3)
64New sections 60A and 60B inserted
60AExemption for participants in standard forestry or permanent forestry activity listed in Part 1 of Schedule 4
60BIncorporation by reference in order made under section 60 or 60A
65Section 61 amended (Requirement to have holding account)
66Section 62 amended (Monitoring of emissions and removals)
67Section 63 amended (Liability to surrender units to cover emissions)
67Section 63 amended (Liability to surrender units to cover emissions)
68Section 64 amended (Entitlement to receive New Zealand units for removal activities)
68Section 64 amended (Entitlement to receive New Zealand units for removal activities)
68ANew section 64A inserted (Transfer of units allocated, or entitled to be received or reimbursed, less any units that must be surrendered or repaid)
64ATransfer of units allocated, or entitled to be received or reimbursed, less any units that must be surrendered or repaid
69Section 65 amended (Annual emissions returns)
70Section 67 amended (Retention of emissions records)
71Section 68 amended (Issuing New Zealand units)
72Section 69 repealed (Notification of intention regarding New Zealand units)
73Cross-heading above section 70 amended
74Sections 70 to 79 replaced
70Allocation plan issued
75Section 81 amended (Entitlement to provisional allocation for eligible industrial activities)
76Section 83 amended (Annual allocation adjustment)
77New sections 84A to 84D inserted
84ARegulations reducing general phase-out rate
84BRegulations increasing phase-out rate for specific activities
84CProcedure for regulations setting phase-out rates
84DClimate Change Commission to advise on regulations setting phase-out rates
77New sections 84A to 84C inserted
84ARegulations setting decreased phase-out rates
84BRegulations setting increased phase-out rates
84CProcedure for regulations setting phase-out rates
78Section 85 amended (Allocation of New Zealand units in relation to agriculture)
79Section 85A amended (Temporary suspension of phase-out rates for assistance under sections 81, 83(2), and 85(2))
79ASection 86 amended (Applications for allocation of New Zealand units for industry and agriculture)
79BSection 86A amended (Provisional allocation to industry in and after 2013)
80Section 86B amended (Decisions on applications for allocations of New Zealand units to industry and agriculture)
81New section 86BA inserted (Transfer of allocated units, less any units that must be surrendered or repaid)
86BATransfer of allocated units, less any units that must be surrendered or repaid
81New sections 86BAA to 86BB inserted
86BAADecisions on applications for allocations of New Zealand units to agriculture
86BATransfer of allocated units to industry, less any units that must be surrendered or repaid
86BBTransfer of allocated units to agriculture, less any units that must be surrendered or repaid
82Section 86C amended (Reconsideration of allocation decisions)
83Section 86E amended (Minister or EPA or chief executive may require further information for purpose of carrying out functions under subpart)
84Section 87 amended (Functions of EPA)
85Section 88 amended (Directions to EPA)
86Section 89 amended (EPA to publish certain information)
87New section 89A inserted (EPA to publish participant data on emissions and removals)
89AEPA to publish participant data on emissions and removals
88Section 90 amended (EPA may prescribe form of certain documents)
89Section 91 amended (Approval of unique emissions factors)
90New section 91A inserted (Correction of unique emissions factors)
91ACorrection of unique emissions factors
91Section 92 amended (Recognition of verifiers)
92Section 93 amended (Appointment of enforcement officers)
93Section 94 amended (Power to require information)
94Section 95 amended (Power to inquire)
95Section 96 amended (Inquiry before District Court Judge)
96Section 99 amended (Obligation to maintain confidentiality)
97Section 100 amended (Power of entry for investigation)
98Section 104 amended (Information obtained under section 100 or 101 only admissible in proceedings for alleged breach of obligations imposed under this Part and Part 5)
99Section 107 amended (Applications for emissions rulings)
100New section 107A inserted (Insufficient information provided for ruling on entire application)
107AInsufficient information provided for ruling on entire application
101Section 108 amended (Matters in relation to which EPA may decline to make emissions rulings)
102Section 109 amended (Making of emissions rulings)
103Section 116 amended (Effect of emissions rulings)
104Section 117 amended (EPA may publish certain aspects of emissions rulings)
105Section 118 amended (Submission of final emissions returns)
106Section 120 amended (Amendment to emissions returns by EPA)
107Section 123 amended (Effect of amendment or assessment)
108Section 124 amended (Reimbursement of units by EPA)
109Section 125 replaced (Repayment of units by persons in case of error)
125Repayment of units by persons in case of error
110Section 127 amended (Time bar for amendment of emissions returns)
111New sections 128A and 128B and cross-heading inserted
128AEPA may act if participant fails to give notice
128BEffects of EPA acting after participant fails to give notice
112Section 129 amended (Offences in relation to failure to comply with various provisions)
113Section 132 amended (Other offences)
114Section 133 amended (Evasion or similar offences)
115Sections 134 to 136 replaced
134Penalty for failing to surrender or repay units by due date
134APenalty for failing to submit emissions return by due date
134BPenalty for failing to submit annual or closing allocation adjustment by due date
134CPenalty for submitting incorrect emissions return
134DPenalty for providing incorrect information in allocation application or adjustment
135Due dates for payment of penalties
135ADeferred payment arrangements for payments of penalties
136Penalties are debt due to Crown
116Section 137 amended (Interest for late payment)
117Section 138 amended (Obligation to pay penalty not suspended by appeal)
118Section 138A replaced (Penalties to be paid into Crown account)
138APenalties to be paid into Crown account
119Section 143 amended (Evidence in proceedings)
120Section 144 amended (Request for review of decisions)
121Section 148 amended (Giving of notices to EPA)
122Section 150 amended (Formation of consolidated group)
123Section 151 amended (Changes to consolidated groups)
124Section 151A amended (Addition of activities to consolidated groups)
125Section 152 amended (Nominated entities)
126Section 153 amended (Effect of being member of consolidated group)
127Section 154 repealed (Emissions returns by consolidated group in respect of activities in Part 1 of Schedule 4)
128Section 155 amended (Ceasing to be member of consolidated group)
129Section 156 replaced (Effect of ceasing to be member of consolidated group)
156Effect of ceasing to be member of consolidated group
130Section 156A amended (Removal of activities from consolidated groups)
131Section 157 amended (Unincorporated bodies)
132Section 159 amended (Recovery of costs)
133Section 160 amended (Review of operation of emissions trading scheme)
134Section 161 amended (Appointment and conduct of review panel)
135Section 161A amended (Regulations in relation to eligible industrial activities)
136Section 161B repealed (Australian eligible industrial activities)
137Section 161C amended (Other eligible industrial activities)
138Section 161D amended (Power to require information for purposes of allocation to industry)
139Section 161E amended (Requirements in respect of notice given under section 161D)
140Section 161F amended (Consultation on activities that may be prescribed as eligible industrial activities)
140Section 161F repealed (Consultation on activities that may be prescribed as eligible industrial activities)
140ASection 161G amended (Regulations in relation to eligible agricultural activities)
140BSection 162 amended (Regulations adding further activity to Part 2 of Schedule 4)
141Section 163 amended (Regulations relating to methodologies and verifiers)
142Section 166 amended (Procedure for regulations relating to methodologies, verification, unique emissions factors, and offsetting)
142Section 166 replaced (Procedure for regulations relating to methodologies, verification, unique emissions factors, and offsetting)
166Consultation and commencement for regulations about methodologies, verifiers, and unique emissions factors
143Section 167 amended (Regulations relating to fees and charges)
144Section 168 amended (Other regulations)
145Section 169 amended (Incorporation by reference in regulations made under section 163, 164, 167, or 168)
146Section 170 replaced (Effect of amendments to, or replacement of, material incorporated by reference in regulations)
170Effect of amendments to, or replacement of, material incorporated by reference in regulations
147Section 172 replaced (Effect of expiry of material incorporated by reference)
172Effect of expiry of material incorporated by reference
148Section 173 amended (Requirement to consult)
149Section 174 amended (Public access to material incorporated by reference)
150Section 175 amended (Application of Legislation Act 2012 to material incorporated by reference)
151Section 178A amended (Option to pay money instead of surrendering units to cover emissions)
152Section 178B amended (Issuing New Zealand units to meet surrender obligations)
153Section 178C repealed (Prohibition on ability to export New Zealand units)
154Part 5 divided into Parts 5 to 5D and new Part 5 divided into subparts
155Section 179 amended (Forest land to be treated as deforested in certain cases)
156Section 179A amended (Forest land may not be treated as deforested in certain cases)
157Section 181 amended (When deforestation to be treated as occurring in respect of pre-1990 forest land)
158Section 183 amended (Applications for exemption for land holdings of less than 50 hectares of pre-1990 forest land)
159Section 183A amended (Certain applications not otherwise permitted by section 183)
160New section 183B inserted (Applications for exemption for some Maori land or land with 10 or more owners)
183BApplications for exemption for some Maori land or land with 10 or more owners
161Section 184 amended (Exemptions for deforestation of land with tree weeds)
162New section 185A inserted (Regulations about exemptions for deforestation of land with tree weeds)
185ARegulations about exemptions for deforestation of land with tree weeds
163Section 186 amended (Methodology for pre-1990 forest land cleared in 8 years or less)
164Section 186B amended (Criteria for approving offsetting forest land applications)
165Section 186C amended (Conditions applicable to offsetting forest land)
166New section 186CA inserted (Variation to approved offsetting forest land application)
186CAVariation to approved offsetting forest land application
167Section 186D amended (Requirements relating to offsetting forest land)
168Section 186F amended (Regulations relating to offsetting)
168Section 186F amended (Regulations relating to offsetting)
169Section 186H amended (Treatment of allocations in respect of pre-1990 forest land that is offset)
170Section 186J amended (Methodology for pre-1990 offsetting forest land cleared after usual rotation period is completed)
171New section 186K inserted (Standard and permanent forestry on post-1989 forest land)
186KStandard and permanent forestry on post-1989 forest land
172Section 187 amended (Conditions on registration as participant in respect of certain activities relating to post-1989 forest land)
172Section 187 amended (Conditions on registration as participant in respect of certain activities relating to post-1989 forest land)
173Section 188 amended (Registration as participant in respect of post-1989 forest land)
173Section 188 amended (Registration as participant in respect of post-1989 forest land)
174Sections 188A to 191 replacedNew sections 188AC and 188AD inserted
188AARemoving registration as participant in standard or permanent forestry
188ABRemoving registration as participant in standard or permanent forestry in certain natural events or clearance for forest management
188ACNotice to forestry participant if their registration added or removed
188ADNotice to interested party if forestry participant’s registration added or removed
189AAProvisional forestry emissions return in any year
189ABFinal forestry emissions return at end of mandatory emissions return period
189BAPreparing provisional or final forestry emissions return
189CAGross liability or entitlement for each CAA1 in emissions return
189CBNet liability or entitlement for each CAA1 in final forestry emissions return
189CCUnit balance calculation for each CAA1 in emissions return
189CDTotal liability or entitlement for all CAA1s in emissions return
189DATotal liability or entitlement has effect, and unit balance updated, when emissions return submitted
189EANew unit balance report
190Maximum liability is unit balance of carbon accounting area
191AACeasing participation for whole carbon accounting areas
191ABEffect of ceasing participation for whole carbon accounting areas
191BACeasing participation for part carbon accounting areas
191BBEffect of ceasing participation for part carbon accounting areas
191CAIf participant has never carried out activity in carbon accounting area
174ASection 189 amended (Emissions returns for post-1989 forest land activities)
174BSection 191 amended (Ceasing to be registered as participant in respect of post-1989 forest land)
174CNew section 191CA inserted (If participant has never carried out activity in carbon accounting area)
191CAIf participant has never carried out activity in carbon accounting area
175Section 192 amended (Effect of transmission of interest in post-1989 forest land)
176Section 193 replaced (Effect of transmission of interest in post-1989 forest land)
193Effect of transmission of interest in post-1989 forest land
176Section 193 amended (Emissions returns in relation to transmitted interests)
177New cross-heading above section 194 inserted
178New sections 194AA to 194EL and cross-headings inserted
194AAEPA may act if persons fail to give notice of transmitted interest
194CAApplication to reconfigure carbon accounting areas for standard or permanent forestry
194CBCriteria to reconfigure carbon accounting areas for standard or permanent forestry
194CCApproval of application to reconfigure carbon accounting areas for standard or permanent forestry
194CDRestriction start date of reconfigured carbon accounting area for permanent forestry
194DAApplication to change activity on post-1989 forest land
194DBCriteria to change activity on post-1989 forest land
194DCApproval of application to change activity on post-1989 forest land
194DDEmissions return for application to change from PFSI activity
194DENew unit balance report for application to change from PFSI activity
194DFLiability to surrender units on transfer from permanent forestry to standard forestry in carbon accounting area (averaging)
194DGLiability to surrender units on transfer from standard forestry in carbon accounting area (averaging) to permanent forestry
194EAPermanent forestry period for land
194EBRestriction on ceasing to be registered for permanent forestry
194ECMinister may approve removal of land from permanent forestry
194EDException from prohibition on clear-felling and deforestation
194EEPermanent forestry land must not be clear-felled
194EFPecuniary penalty for clear-felling of permanent forestry land
194EGRegulations for pecuniary penalty for clear-felling
194EHPermanent forestry land must not be deforested
194EIPecuniary penalty for deforestation of permanent forestry land
194EJDue dates for payment of penalties and recovery of EPA’s costs
194EKOption must be chosen at end of permanent forestry period
194ELRemoval of carbon accounting area from permanent forestry
179New subparts 5 and 6 of Part 5 inserted
194FAInterpretation for subpart 5
194FBAveraging accounting methodology
194FCAveraging accounting applies to carbon accounting areas (averaging)
194FDFirst rotation forest and subsequent rotation forest
194GAApplication for carbon equivalent forest land swap
194GBCriteria for carbon equivalent forest land swap
194GCEffect of approval of application to swap land
194HADuration of approved swap land status
194HBEffect of being approved swap land
194HCSubsequent rotation forest
194HDReconfiguration restrictions
194HENo transfers to permanent forestry
194JARelease criteria
194JBNotice of compliance with release criteria
194JCLiability to surrender units if release criteria not met
194JDMaximum liability and apportionment
194JERelease date unit balance report
194JFEffect on release date
194KAEPA may take action if original criteria not met
194KBEffect of declaration after release date
194KCRemedial action: land substitution
194KDCriteria for land substitution
194KEEffect of land substitution
194LARegulations for averaging
194MAInterpretation for subpart 6
194NAApplication for temporary adverse event suspension
194NBCriteria of temporary adverse event suspension
194NCApproval of temporary adverse event suspension
194PADuration of temporary adverse event land status
194PBEffect of being temporary adverse event land
194PCNo liability or entitlement
194PDFirst rotation forest
194PEReconfiguration restrictions
194PFDamage to land turns out to be permanent
194QARe-establishment criteria
194QBNotice of achievement of re-establishment
194QCEffect on re-establishment date
194RACarbon recovery criteria
194RBNotice when land achieves carbon recovery
194SACancellation for breach of conditions
194SBOther circumstances causing land to cease to be temporary adverse event land
194SCConsequences if land ceases to be temporary adverse event land
194TARegulations for temporary adverse events
180New sections 194UA to 194UC and cross-headings inserted
194UAInput returns may be submitted for certain emissions returns for forestry activities
194UBEPA may do calculations based on input return
194UCRegulations for input returns
181Section 195 amended (Notification of status of forest land)
182Sections 196 and 197 and cross-heading replaced
196AMeaning of forestry classification
196BEPA may give forestry classifications to areas of land
196CEffect of forestry classifications
196DChange of forestry classification to correct error
196EChange of forestry classification to update for changes
196FForestry classification with effect before date classification given
196GRegulations for forestry classifications
197Entitlement to units for removals from grant-funded forests
197ARegulations for grant-funded forests
183Section 198 amended (Registration as participant by purchasers of obligation fuel)
184Section 202 amended (Activities added to Part 2 of Schedule 3)
185Section 209 amended (Registration as participant by purchasers of coal or natural gas)
186New section 211A inserted (Effect of stockpiling coal by coal importer or miner)
211AEffect of stockpiling coal by coal importer or miner
186ASection 213 amended (Participant in respect of subpart 4 of Part 5 of Schedule 3)
186BNew sections 215 and 216 inserted
215Ministers to report on alternative pricing system for farm-level agriculture emissions
216Regulations for voluntary reporting or surrender for animalsfarmer or fertiliserfarmer activity
187Section 217 amended (Transitional provision for penalties)
187Section 217 amended (Transitional provision for penalties)
188Section 218 amended (Transitional provision for voluntary reporting)
189Section 219 amended (Transitional provision for mandatory reporting by certain participants)
190Sections 220 to 222 repealed
190Sections 219 to 222 replaced
219Transitional provision for surrender obligations of certain participants
220Commission to report on progress towards meeting farm-level obligations
191Section 222H amended (Transitional provision for unincorporated bodies)
192Section 233 amended (Rate of synthetic greenhouse gas levy)
192Section 233 amended (Rate of synthetic greenhouse gas levy)
193Sections 234 and 236 repealed
193Section 234 repealed (Transitional provision for synthetic greenhouse gas levy)
193ASection 236 amended (Maximum price of carbon for purpose of levy calculation)
194Section 243 amended (Circumstances where levy may be refunded)
194ASection 244 amended (Exemptions from payment of synthetic greenhouse gas levy)
194BSection 245 amended (Regulations specifying levy rates)
195Section 246 amended (Regulations relating to synthetic greenhouse gas levy)
195Section 246 amended (Regulations relating to synthetic greenhouse gas levy)
196Section 247 amended (Process for making orders and regulations)
196Section 247 repealed (Process for making orders and regulations)
197Section 249 amended (Application of section 88 (Directions to EPA))
198Section 252 amended (Enforcement officers)
199Section 257 amended (Power of entry for investigation, warrants, etc)
200Section 258 amended (Regulations relating to verifiers)
200Section 258 amended (Regulations relating to verifiers)
200ASection 269 amended (Review of operation and effectiveness of levy)
201Section 270 amended (Appointment and conduct of independent panel)
202New Schedule 1AA inserted
202Schedule 1AA amended
203New Schedule 2A inserted
204Schedule 3 amended
205Schedule 4 amended
205ANew Schedule 5 inserted
206Section 30G amended (Regulations relating to Part 2)
207Section 183A amended (Certain applications not otherwise permitted by section 183)
208Section 186B amended (Criteria for approving offsetting forest land applications)
209Section 186H amended (Treatment of allocations in respect of pre-1990 forest land that is offset)
209ASection 189 amended (Emissions returns for post-1989 forest land activities)
209BSection 191 amended (Ceasing to be registered as participant in respect of post-1989 forest land)
210Section 189DA amended (Total liability or entitlement has effect, and unit balance updated, when emissions return submitted)
211Section 191AB amended (Effect of ceasing participation for whole carbon accounting areas)
212Section 191BB amended (Effect of ceasing participation for part carbon accounting areas)
213Section 194AA amended (EPA may act if persons fail to give notice of transmitted interest)
214Section 194DF amended (Liability to surrender units on transfer from permanent forestry to standard forestry in carbon accounting area (averaging))
215Section 194DG amended (Liability to surrender units on transfer from standard forestry in carbon accounting area (averaging) to permanent forestry)
216Section 194EL amended (Removal of carbon accounting area from permanent forestry)
217Section 194FC amended (Averaging accounting applies to carbon accounting areas (averaging))
218Section 194GC amended (Effect of approval of application to swap land)
219Section 194JC amended (Liability to surrender units if release criteria not met)
220Section 194KB amended (Effect of declaration after release date)
221Section 194KE amended (Effect of land substitution)
222Schedule 1AA amended
222Schedule 1AA amended
223Section 89 amended (EPA to publish certain information)
222ASection 3A amended (Treaty of Waitangi (Te Tiriti o Waitangi))
222BSection 3B amended (Consultation about certain regulations, orders, and notices)
222CSection 4 amended (Interpretation)
222DNew subpart 4 of Part 2 inserted
30WRegulations setting price of carbon
223Section 89 amended (EPA to publish certain information)
223ASection 120 amended (Amendment to emissions returns by EPA)
223BSection 123 amended (Effect of amendment or assessment)
223CSection 129 amended (Offences in relation to failure to comply with various provisions)
223DSection 132 amended (Other offences)
223ESections 134 to 136 replaced
134Penalty for failing to surrender or repay units by due date
134APenalty for failing to submit emissions return by due date
134BPenalty for failing to submit annual or closing allocation adjustment by due date
134CPenalty for submitting incorrect emissions return
134DPenalty for providing incorrect information in allocation application or adjustment
135Date for payment of penalty
135ADeferred payment arrangements for payments of penalties
136Penalties are debt due to Crown
223FSection 137 amended (Interest for late payment)
223GSection 138 amended (Obligation to pay penalty not suspended by appeal)
223HSection 138A replaced (Penalties to be paid into Crown account)
138APenalties to be paid into Crown account
223ISection 159 amended (Recovery of costs)
223JSection 179 amended (Forest land to be treated as deforested in certain cases)
223KSection 181 amended (When deforestation to be treated as occurring in respect of pre-1990 forest land)
223LSection 189 amended (Emissions returns for post-1989 forest land activities)
223MSection 192 amended (Effect of transmission of interest in post-1989 forest land)
223NSection 217 amended (Transitional provision for penalties)
223OSection 233 amended (Rate of synthetic greenhouse gas levy)
223PSection 236 repealed (Maximum price of carbon for purpose of levy calculation)
223QSchedule 1AA amended
223RSection 3A amended (Treaty of Waitangi (Te Tiriti o Waitangi))
223SSection 3B amended (Consultation about certain regulations, orders, and notices)
223TSection 4 amended (Interpretation)
223USection 54 amended (Participants)
223VSection 56 amended (Registration as participant in respect of activities listed in Schedule 3)
223WSection 57 amended (Applicant to be registered as participant in respect of activities listed in Schedule 4)
223XSection 58 amended (Removal from register of participants in respect of activities listed in Schedule 4)
223YNew section 59A inserted (Removal from register for persistent non-compliance (standard forestry participants only))
59ARemoval from register for persistent non-compliance (standard forestry participants only)
223ZSection 60A amended (Exemption for participants in activity listed in Part 1 of Schedule 4)
223ZASection 62 amended (Monitoring of emissions and removals)
223ZBSection 63 amended (Liability to surrender units to cover emissions)
223ZCSection 64 amended (Entitlement to receive New Zealand units for removal activities)
223ZDSection 65 amended (Annual emissions returns)
223ZESection 67 amended (Retention of emissions records)
223ZFSection 89 amended (EPA to publish certain information)
223ZGSection 91 amended (Approval of unique emissions factors)
223ZHSection 92 amended (Recognition of verifiers)
223ZISection 107 amended (Applications for emissions rulings)
223ZJSection 109 amended (Making of emissions rulings)
223ZKSection 118 amended (Submission of final emissions returns)
223ZLSection 127 amended (Time bar for amendment of emissions returns)
223ZMNew section 128A and cross-heading inserted
128AEPA may act if participant fails to give notice
223ZNSection 134A amended (Penalty for failing to submit emissions return by due date)
223ZOSection 134C amended (Penalty for submitting incorrect emissions return)
223ZPSection 135A amended (Deferred payment arrangements for payments of penalties)
223ZQSection 136 amended (Penalties are debt due to Crown)
223ZRSection 137 amended (Interest for late payment)
223ZSSection 138 amended (Obligation to pay penalty not suspended by appeal)
223ZTSection 138A amended (Penalties to be paid into Crown account)
223ZUSection 159 amended (Recovery of costs)
223ZVSection 163 amended (Regulations relating to methodologies and verifiers)
223ZWSection 168 amended (Other regulations)
223ZXSection 169 amended (Incorporation by reference in certain regulations)
223ZYPart 5 replaced
179Forest land to be treated as deforested in certain cases
179AForest land may not be treated as deforested in certain cases
180Participant in respect of pre-1990 forest land
181When deforestation to be treated as occurring in respect of pre-1990 forest land
183Applications for exemption for land holdings of less than 50 hectares of pre-1990 forest land
183ACertain applications not otherwise permitted by section 183
183BApplications for exemption for some Maori land or land with 10 or more owners
184Exemptions for deforestation of land with tree weeds
185Effect of exemption
185ARegulations about exemptions for deforestation of land with tree weeds
186Methodology for pre-1990 forest land cleared in 8 years or less
186AAInterpretation
186BAApplication to offset land for pre-1990 forest land
186BBCriteria for P90 offset application
186BCEffect of approval of P90 offset application
186BDEffect of P90 offset application being declined
186CAAllocations for pre-1990 forest land to be surrendered when application approved
186DAP90 offset release criteria
186DBP90 release criteria notice
186DCApplication to add area 2 (approved) land
186DDCriteria for adding area 2 (approved) land
186DEEffect of approval of application to add area 2 (approved) land
186DFEffect of application to add area 2 (approved) land being declined
186DGLand that must be identified as area 1 (not offset) land
186DHExtension of time to add area 2 (approved) land
186DIEffect on P90 offset date
186DJReimbursement of surrendered allocation
186EAParticipant in respect of P90 offsetting land
186EBClearing or deforestation before required equivalence date
186ECClearing before required equivalence date
186EDDeforestation before required equivalence date
186EEP90 offsetting land becomes pre-1990 forest land
186FAP90 offsetting land register
186FBEPA to give information on request
186FCRegulations for P90 offsetting
186KStandard and permanent forestry on post-1989 forest land
187Conditions on registration as participant in certain activities of standard or permanent forestry in respect of post-1989 forest land
187AEPA to give public notice of criteria for assessing risk of tree weed spread
188Registration as participant in standard or permanent forestry
188ACNotice to forestry participant if their registration added or removed
188ADNotice to interested party if forestry participant’s registration added or removed
188AARemoving registration as participant in standard or permanent forestry
188ABRemoving registration as participant in standard or permanent forestry in certain natural events or clearance for forest management
189AAProvisional forestry emissions return in any year
189ABFinal forestry emissions return at end of mandatory emissions return period
189BAPreparing provisional or final forestry emissions return
189CAGross liability or entitlement for each CAA1 in emissions return
189CBNet liability or entitlement for each CAA1 in final forestry emissions return
189CCUnit balance calculation for each CAA1 in emissions return
189CDTotal liability or entitlement for all CAA1s in emissions return
189DATotal liability or entitlement has effect, and unit balance updated, when emissions return submitted
189EANew unit balance report
190Maximum liability is unit balance of carbon accounting area
191AACeasing participation for whole carbon accounting areas
191ABEffect of ceasing participation for whole carbon accounting areas
191BACeasing participation for part carbon accounting areas
191BBEffect of ceasing participation for part carbon accounting areas
191CAIf participant has never carried out activity in carbon accounting area
192Transmission of interest in post-1989 forest land
193Effect of transmission of interest in post-1989 forest land
194Information about status of forest land
194AAEPA may act if person fails to give notice of transmitted interest
194ABHow EPA may act
194ACEPA may attribute liability and entitlement to final transferee after earlier non-compliant transmission
194CAApplication to reconfigure carbon accounting areas for standard or permanent forestry
194CBCriteria to reconfigure carbon accounting areas for standard or permanent forestry
194CCApproval of application to reconfigure carbon accounting areas for standard or permanent forestry
194CDRestriction start date of reconfigured carbon accounting area for permanent forestry
194DAApplication to change activity on post-1989 forest land
194DBCriteria to change activity on post-1989 forest land
194DCApproval of application to change activity on post-1989 forest land
194DDEmissions return for application to change from PFSI activity
194DENew unit balance report for application to change from PFSI activity
194DEALiability to surrender units on transfer from PFSI activity to standard forestry in carbon accounting area (averaging)
194DFLiability to surrender units on transfer from permanent forestry to standard forestry in carbon accounting area (averaging)
194DGLiability to surrender units on transfer from standard forestry in carbon accounting area (averaging) to permanent forestry
194EAPermanent forestry period for land
194EBRestriction on ceasing to be registered for permanent forestry
194ECMinister may approve removal of land from permanent forestry
194EDException from prohibition on clear-felling and deforestation
194EEPermanent forestry land must not be clear-felled
194EFPecuniary penalty for clear-felling of permanent forestry land
194EGRegulations for pecuniary penalty for clear-felling
194EHPermanent forestry land must not be deforested
194EIPecuniary penalty for deforestation of permanent forestry land
194EJDue dates for payment of penalties and recovery of EPA’s costs
194EKOption must be chosen at end of permanent forestry period
194ELRemoval of carbon accounting area from permanent forestry
194FAInterpretation
194FBAveraging accounting methodology
194FCAveraging accounting applies to carbon accounting areas (averaging)
194FDFirst rotation forest and subsequent rotation forest
194FERegulations for averaging
194GAAInterpretation
194GAApplication to offset land for land in carbon accounting area (averaging)
194GBCriteria for P89 offset application
194GCEffect of approval of P89 offset application
194HADuration of P89 offsetting (approved) land status
194HBEffect of being P89 offsetting (approved) land
194HCSubsequent rotation forest
194HDReconfiguration restrictions
194HENo transfers to permanent forestry
194JAP89 offset release criteria
194JBP89 release criteria notice
194JCLiability to surrender units if P89 offset release criteria not met
194JDMaximum liability and apportionment
194JEP89 offset date unit balance report
194JFEffect on P89 offset date
194KAEPA may take action if original criteria not met
194KBEffect of declaration after P89 offset date
194KCRemedial action: land substitution
194KDCriteria for land substitution
194KEEffect of approval of land substitution
194KFEffect of application to add area 2 (approved) land being declined
194LARegulations for P89 offsetting
194MAInterpretation for this subpart
194NAApplication for temporary adverse event suspension
194NBCriteria of temporary adverse event suspension
194NCApproval of temporary adverse event suspension
194PADuration of temporary adverse event land status
194PBEffect of being temporary adverse event land
194PCNo liability or entitlement
194PDFirst rotation forest
194PEReconfiguration restrictions
194PFDamage to land turns out to be permanent
194QARe-establishment criteria
194QBNotice of achievement of re-establishment
194QCEffect on re-establishment date
194RACarbon recovery criteria
194RBNotice when land achieves carbon recovery
194SACancellation for breach of conditions
194SBOther circumstances causing land to cease to be temporary adverse event land
194SCConsequences if land ceases to be temporary adverse event land
194TARegulations for temporary adverse events
194UAInput returns may be submitted for certain emissions returns for forestry activities
194UBEPA may do calculations based on input return
194UCRegulations for input returns
195Notification of status of forest land
196AMeaning of forestry classification
196BEPA may give forestry classifications to areas of land
196CEffect of forestry classifications
196DChange of forestry classification to correct error
196EChange of forestry classification to update for changes
196FForestry classification with effect before date classification given
196GRegulations for forestry classifications
197Entitlement to units for removals from grant-funded forests
197ARegulations for grant-funded forests
223ZZSchedule 1AA amended
223ZZASchedule 3 amended
223ZZBSchedule 4 amended
224Section 2A amended (Application of Schedules 3 and 4)
225Section 27 amended (Information accessible by search)
226Section 89 amended (EPA to publish certain information)
227Sections 178A and 178B repealed
228Section 233 amended (Rate of synthetic greenhouse gas levy)
229Schedule 1AA amended
229ASchedule 4 amended
230Climate Change (Fishing Allocation Plan) Order 2010 revoked
231Consequential amendments
232Consequential amendments
233Consequential amendments
233AForests (Permanent Forest Sink) Regulations 2007 revoked
234Consequential amendments
Legislative history

The Parliament of New Zealand enacts as follows:

1 Title

This Act is the Climate Change Response (Emissions Trading Reform) Amendment Act 2019.

2 Commencement

(1)

This Act comes into force as follows:

(a)

subpart 1 of Part 1 and subpart 1 of Part 2 come into force on the day after Royal assent:

(b)

subpart 2 of Part 1 and subpart 2 of Part 2 come into force on 30 November 2020:

(c)

subpart 3 of Part 1 comes into force on 31 December 2020:

(d)

subpart 3 of Part 2 comes into force on 1 January 2021:

(c)

subpart 3 of Part 1 comes into force on 1 January 2021:

(d)

subpart 3A of Part 1 and subpart 3 of Part 2 come into force on 1 January 2022:

(e)

subpart 4 of Part 2 comes into force on 1 January 2022:

(f)

subpart 4 of Part 1 comes into force—

(i)

on a single date set by Order in Council; or

(ii)

otherwise, on 1 January 2023.

(ii)

on 1 January 2023, if an earlier date has not been set:

(g)

subpart 5 of Part 1 and subpart 4 of Part 2 come into force on 1 January 2023.

(2)

If an auction is to be conducted under section 6A of the principal Act in the period starting on the day after Royal assent and ending on 31 December 2022, the Minister must recommend the making of an Order in Council that sets the single date on which subpart 4 of Part 1 comes into force as the date of that first auction.

3 Principal Act

This Act amends the Climate Change Response Act 2002 (the principal Act).

Part 1 Amendments to principal Act

Subpart 1—Amendments that commence on day after Royal assent

4 Section 2A amended (Application of Schedules 3 and 4)

(1AA)

In section 2A(1)(a)(ii), after Schedule 3, insert (for fertiliserfarmer or animalsfarmer activities).

(1)

In section 2A(1)(b), replace “221” with 219.

(2)

In section 2A(3), delete “Subpart 1 of”.

(3)

In section 2A(4), before “Part 3”, insert “Subpart 1 of”.

(4)

Replace section 2A(5) with:

(5)

Subpart 1 of Part 5 of Schedule 3 applies

(a)

on and after 1 January 2011, except in relation to surrender obligations; and

(b)

on and after 1 January 2025 in relation to surrender obligations.

(4)

Replace section 2A(5) and (6) with:

(5A)

Subpart 1 of Part 5 of Schedule 3 (for fertiliserprocessor activities)

(a)

applies on and after 1 January 2011; but

(b)

is affected by section 219, which provides that emissions released during the following excluded period do not require units to be surrendered: the period

(i)

starting on 1 January 2011; and

(ii)

ending on a date determined by that section (which may be 31 December 2024 or another date as early as 1 July 2022).

(5B)

Subpart 2 of Part 5 of Schedule 3 (for fertiliserfarmer activities)

(a)

applies on and after a date appointed by the Governor-General by Order in Council (see section 2B); but

(b)

is affected by section 219, which provides that emissions released during the following excluded period do not require units to be surrendered: the first year in which that subpart applies to the persons, or class of persons, carrying out that activity.

(5C)

Subpart 3 of Part 5 of Schedule 3 (for animalsprocessor activities)

(a)

applies on and after 1 January 2011; but

(b)

is affected by section 219, which provides that emissions released during the following excluded period do not require units to be surrendered: the period

(i)

starting on 1 January 2011; and

(ii)

ending on a date determined by that section (which may be 31 December 2024 or another date as early as 1 July 2022).

(5D)

Subpart 4 of Part 5 of Schedule 3 (for animalsfarmer activities)

(a)

applies on and after 1 January 2024 or a later date appointed by the Governor-General by Order in Council (see section 2B); but

(b)

is affected by section 219, which provides that emissions released during the following excluded period do not require units to be surrendered: the first year in which that subpart applies to the persons, or class of persons, carrying out that activity.

(5)

Replace section 2A(9) with:

(9)

Subpart 4 of Part 5 of Schedule 3 applies

(a)

on and after 1 January 2024, except in relation to surrender obligations; and

(b)

on and after 1 January 2025 in relation to surrender obligations.

(5)

Replace section 2A(8) and (9) with:

(8)

Part 1A of Schedule 4 applies on and after 1 January 2022.

5 Section 2B amended (Orders in Council in relation to Part 5 of Schedule 3)

In section 2B(3)(c)(ii), replace greenhouse gas emissions trading scheme established under this Act with emissions trading scheme.

6 Section 2C amended (Effect of Orders in Council in relation to Part 5 of Schedule 3)

(1)

Replace section 2C(1) with:

(1)

This section applies

(a)

to subparts 1 and 2 of Part 5 of Schedule 3 at any time that those subparts apply at the same time (because of an Order in Council made under section 2A(8)); and

(b)

to subparts 3 and 4 of Part 5 of Schedule 3 on and from 1 January 2024.

(2)

Replace section 2C(4) with:

(4)

If an Order in Council is made under section 2A(8) that has the effect of applying subpart 2 of Part 5 of Schedule 3 to all persons who carry out an activity listed in that subpart from a date appointed in that order, then section 2A(5) and subpart 1 of Part 5 of Schedule 3 expire and are repealed on the date from which all persons carrying out an activity listed in subpart 2 of Part 5 of Schedule 3 are liable to surrender units in respect of emissions from the activity.

(4A)

Section 2A(6) and subpart 3 of Part 5 of Schedule 3 expire and are repealed on 1 January 2025.

(3)

In section 2C(5), replace or (4)(a) or (b) with , (4), or (4A).

5 Sections 2B and 2C replaced

Replace sections 2B and 2C with:

2B Orders in Council in relation to subparts 2 and 4 of Part 5 of Schedule 3 (Agriculture)

(1)

This section relates to an Order in Council made under section 2A(5B) or (5D), which appoints a date on and after which subpart 2 or 4 of Part 5 of Schedule 3 (the subpart) applies (for fertiliserfarmer or animalsfarmer activities).

(2)

The order must

(a)

be made on the recommendation of the Minister; and

(b)

appoint a date that is 1 January in a year; and

(c)

be made at least 1 year before the date appointed by the order.

(3)

The order may provide that the subpart applies, on and after the date appointed by the order,

(a)

specifically to 1 or more classes of person who carry out an activity listed in the subpart; or

(b)

generally to all persons who carry out an activity listed in the subpart.

(4)

Before recommending the making of the order, the Minister must comply with subsections (5) and (6).

(5)

The Minister must have regard to

(a)

the need for the EPA to be able to verify information contained in emissions returns of the persons who will become participants in an activity listed in the subpart by operation of the order; and

(b)

the likelihood that, as a result of becoming participants by operation of the order, persons carrying out an activity listed in the subpart will reduce their emissions; and

(c)

the desirability of minimising

(i)

the compliance and administration costs of persons who will become participants in an activity listed in the subpart by operation of the order; and

(ii)

the administration costs of the Crown in administering the emissions trading scheme.

(6)

The Minister must consult, or be satisfied that the chief executive has consulted, the persons (or representatives of those persons) that appear to the consulter likely to have an interest in the order.

2C Effect of overlapping application of subparts of Part 5 of Schedule 3 (Agriculture)

(1)

This section applies

(a)

to the fertiliserprocessor and fertiliserfarmer subparts (of Part 5 of Schedule 3) at any time that those subparts apply at the same time (because of an Order in Council made under section 2A(5B)); and

(b)

to the animalsprocessor and animalsfarmer subparts (of Part 5 of Schedule 3) on and after

(i)

1 January 2024; or

(ii)

if an Order in Council is made under section 2A(5D), the date appointed in that order.

(2)

If this section applies, then regulations made under section 163(1) may require

(a)

a person carrying out a fertiliserprocessor activity and a person carrying out a fertiliserfarmer activity to

(i)

collect data or other information relating to the same synthetic fertiliser; and

(ii)

calculate emissions relating to the same synthetic fertiliser; or

(b)

a person carrying out an animalsprocessor activity and a person carrying out an animalsfarmer activity to

(i)

collect data or other information relating to the same ruminant animals, pigs, horses, or poultry; and

(ii)

calculate emissions relating to the same ruminant animals, pigs, horses, or poultry.

(3)

However,

(a)

on and after the first day in respect of which the person carrying out a fertiliserfarmer activity is required to surrender units for emissions relating to the fertiliser, this Act no longer applies to the person carrying out the fertiliserprocessor activity in relation to that fertiliser; and

(b)

on and after the first day in respect of which the person carrying out an animalsfarmer activity is required to surrender units for emissions relating to the ruminant animals, pigs, horses, or poultry, this Act no longer applies to the person carrying out the animalsprocessor activity in relation to those ruminant animals, pigs, horses, or poultry.

(4)

If an Order in Council is made under section 2A(5B) that has the effect of applying the fertiliserfarmer subpart to all persons who carry out a fertiliserfarmer activity, then section 2A(5A) and the fertiliserprocessor subpart expire and are repealed on the first day in respect of which emissions from all persons carrying out a fertiliserfarmer activity may result in liability to surrender units.

(5)

On the first day on which, under section 2A(5D), the animalsfarmer subpart applies to all persons who carry out an animalsfarmer activity, and emissions from all persons carrying out the activity may result in liability to surrender units, section 2A(5C) and the animalsprocessor subpart expire and are repealed.

(6)

If, by operation of subsection (3), (4), or (5), this Act no longer applies to a person carrying out a fertiliserprocessor or animalsprocessor activity, then

(a)

section 54(4) applies, with any necessary modifications, to any person who has ceased, by operation of that subsection, to be a participant in respect of that activity; and

(b)

the person is not required to comply with section 59, but the EPA may, for the purposes of section 59(2), determine that the person has ceased to carry out the activity.

(7)

In this section and sections 2A, 2B, 216, and 219,

animalsfarmer subpart means subpart 4 of Part 5 of Schedule 3, and animalsfarmer activity means an activity listed in that subpart

animalsprocessor subpart means subpart 3 of Part 5 of Schedule 3, and animalsprocessor activity means an activity listed in that subpart

fertiliserfarmer subpart means subpart 2 of Part 5 of Schedule 3, and fertiliserfarmer activity means an activity listed in that subpart

fertiliserprocessor subpart means subpart 1 of Part 5 of Schedule 3, and fertiliserprocessor activity means an activity listed in that subpart.

7 Section 3 amended (Purpose)

(1)

In section 3(1)(a), replace “and the Protocol” with “, the Protocol, and the Paris Agreement”.

(2)

In section 3(1)(a)(i), after “period”, insert “starting on 1 January 2008 and ending on 31 December 2012”.

(3)

In section 3(1)(a)(ii), replace “Article 7 of the Protocol and Article 12 of the Convention” with “Article 12 of the Convention, Article 7 of the Protocol, and Article 13.7 of the Paris Agreement”.

(4)

In section 3(1)(b)(i) and (c)(i), replace “and the Protocol” with “, the Protocol, and the Paris Agreement”.

(5)

Replace section 3(1)(b)(ii) with:

(ii)

assisting New Zealand to meet its 2050 target and emissions budgets; and

(6)

In section 3(1)(c)(i), replace and the Protocol with , the Protocol, and the Paris Agreement.

(7)

Replace section 3(1)(c)(ii) with:

(ii)

assisting New Zealand to meet its 2050 target and emissions budgets.

(8)

Repeal section 3(3).

8 Section 3A amended (Treaty of Waitangi (Te Tiriti o Waitangi))

(1)

Replace section 3A(a) to (c) with:

(a)

with respect to the following sections (which relate to powers to make regulations or Orders in Council), before recommending the making of a regulation or an order under those sections, the Minister must consult, or be satisfied that the chief executive has consulted, representatives of iwi and Māori that appear to the Minister or chief executive likely to have an interest in the regulation or order:

(i)

section 2B (Part 5 of Schedule 3):

(ii)

section 30G(1)(b)(i), (c), (j), and (k) (Part 2institutional arrangements):

(iii)

section 30GA (auctions to sell New Zealand units):

(iv)

section 30GB (overall limits and price controls for units):

(v)

section 30GD (auction monitor):

(vi)

section 30M (infringement notices):

(vii)

section 30W(1)(a) (price of carbon):

(viii)

section 50(2) and (3) (Part 3inventory agency):

(ix)

section 60 (exemptions in respect of activities listed in Schedule 3):

(x)

section 60A (exemptions for participants in standard forestry or permanent forestry):

(xi)

section 84A (phase-out rates):

(xii)

section 161A (eligible industrial activities):

(xiii)

section 161G (eligible agricultural activities):

(xiv)

section 162 (adding further activity to Part 2 of Schedule 4):

(xv)

section 163 (methodologies and verifiers):

(xvi)

section 164 (unique emissions factors):

(xvii)

section 185A (exemptions for deforestation of land with tree weeds):

(xviii)

section 186F (pre-1990 offsetting forest land):

(xix)

section 194EG (pecuniary penalty for clear-felling):

(xx)

section 194LA (averaging):

(xxi)

section 194TA (temporary adverse event suspensions):

(xxii)

section 194UC (input returns):

(xxiii)

section 196G (forestry classifications):

(xxiv)

section 225 (targets):

(xxv)

section 244 (exemptions from payment of synthetic greenhouse gas levy):

(xxvi)

section 246(1)(a) to (e) (synthetic greenhouse gas levy):

(xxvii)

section 258 (verifiers):

(2)

Repeal section 3A(e) to (h) and (j).

8 Section 3A amended (Treaty of Waitangi (Te Tiriti o Waitangi))

(1)

Repeal section 3A(a).

(2)

Replace section 3A(b) and (c) with:

(a)

with respect to the following provisions (which relate to powers to make regulations or Orders in Council or to give notice in the Gazette), before recommending the making of regulations or an order, or giving notice in the Gazette, under those provisions, the Minister must consult, or be satisfied that the chief executive has consulted, representatives of iwi and Māori that appear to the Minister or chief executive likely to have an interest in the regulations, order, or notice:

(i)

section 2A(5B) or (5D) (Part 5 of Schedule 3):

(ii)

section 30G(1)(b)(i), (c), (j), and (k) (Part 2institutional arrangements):

(iii)

section 30GA (auctions to sell New Zealand units):

(iv)

section 30GB (limits and price controls for units):

(v)

section 30GD (auction monitor):

(vi)

section 30M (infringement offences):

(vii)

section 60 (exemptions in respect of activities listed in Schedule 3):

(viii)

section 60A (exemptions for participants in activity listed in Part 1 of Schedule 4):

(ix)

section 84A or 84B (phase-out rates for eligible industrial activities):

(x)

section 161D(1)(a) (notice specifying description of activity in relation to industrial allocations), unless the only purpose of the notice is to require persons to provide electricity-related contracts or any information related to those contracts:

(xi)

section 161G (eligible agricultural activities):

(xii)

section 162 (adding further activity to Part 2 of Schedule 4):

(xiii)

section 163 (methodologies and verifiers):

(xiv)

section 164 (unique emissions factors):

(xv)

section 168(1)(nc) (New Zealand’s best practice forest management):

(xvi)

section 186F (pre-1990 offsetting forest land):

(xvii)

section 194UC (input returns):

(xviii)

section 196G (forestry classifications):

(xix)

section 244 (exemptions from payment of synthetic greenhouse gas levy):

(xx)

section 246(1)(a) to (e) (synthetic greenhouse gas levy):

(xxi)

section 258 (verifiers):

(3)

Repeal section 3A(e) to (j).

8A New section 3B inserted (Consultation about certain regulations, orders, and notices)

After section 3A, insert:

3B Consultation about certain regulations, orders, and notices

(1)

The Minister must comply with this section before recommending the making of regulations or an Order in Council, or giving notice in the Gazette, under any of the following:

(a)

section 30G(1)(b)(i), (c), (j), or (k) (dealings with units under Part 2):

(b)

section 30GA (auctions to sell New Zealand units):

(c)

section 30GB (limits and price controls for units):

(d)

section 30GD (auction monitor):

(e)

section 30M (infringement offences):

(f)

section 60 (exemptions in respect of activities listed in Schedule 3), unless the Crown has signed a negotiated greenhouse agreement with the person exempted:

(g)

section 60A (exemptions for participants in activity listed in Part 1 of Schedule 4):

(h)

section 84A or 84B (phase-out rates for eligible industrial activities):

(i)

section 161D(1)(a) (notice specifying description of activity in relation to industrial allocations), unless the only purpose of the notice is

(i)

to require persons to provide electricity-related contracts or any information related to those contracts; or

(ii)

to provide the Minister with the information necessary to determine whether any matter should be considered by a review under section 160:

(j)

section 161G(1)(a)(ii) (allocative baseline of eligible agricultural activity):

(k)

section 162 (adding further activity to Part 2 of Schedule 4):

(l)

section 163 (methodologies and verifiers):

(m)

section 164 (unique emissions factors):

(n)

section 168(1)(nc) (New Zealand’s best practice forest management):

(o)

section 186F (pre-1990 offsetting forest land):

(p)

section 194UC (input returns):

(q)

section 196G (forestry classifications):

(r)

section 216 (voluntary reporting or surrender for animalsfarmer or fertiliserfarmer activity):

(s)

section 233(4)(a) (methodology for specifying price of carbon):

(t)

section 244 (exemptions from payment of synthetic greenhouse gas levy):

(u)

section 246(1)(a) to (e) (synthetic greenhouse gas levy):

(v)

section 258 (verifiers).

(2)

The Minister must also comply with this section before recommending the revocation of an Order in Council under section 60, 60A, or 244 (exemptions for various matters).

(3)

The Minister must be satisfied that 1 of the following has consulted the persons (or representatives of those persons) that appear to the consulter likely to be substantially affected by any regulations made in accordance with the recommendation, by any order made or revoked in accordance with the recommendation, or by the notice:

(a)

the Minister or the chief executive; or

(b)

for regulations made under section 30GB, 84A, or 84B, the Minister, the chief executive, or the Climate Change Commission.

(4)

The process for consultation must, to the extent practicable in the circumstances, include

(a)

adequate and appropriate notice of the proposed terms of the recommendation or notice, and of the reasons for it; and

(b)

a reasonable opportunity for interested persons to consider the recommendation or notice and make submissions; and

(c)

adequate and appropriate consideration of submissions.

(5)

This section does not apply to regulations made under the following if the Minister considers it is in the national interest that the regulations be made urgently:

(a)

section 30G(1)(b)(i), (c), (j), or (k) (dealings with units under Part 2):

(b)

section 30GA (auctions to sell New Zealand units):

(c)

section 30GB (limits and price controls for units):

(d)

section 30GD (auction monitor).

(6)

A failure to comply with this section does not affect the validity of any regulations, order, or notice to which it applies.

9 Section 4 amended (Interpretation)

(1)

In section 4(1), repeal the definitions of allocation plan, approved overseas unit, assigned amount unit, Australian eligible industrial activity, carbon accounting area, carbon dioxide equivalent, carry-over, CDM registry, certified emission reduction unit, clean development mechanism project, clear, commitment period reserve, conversion account, convert, deforest, designated operational entity, elect, eligible land, emission reduction unit, emissions budget period, emissions return, executive board, expire or expiry, first commitment period, fishing allocation plan, greenhouse gas, initial assigned amount, international transaction log, joint implementation project, Kyoto units, long-term certified emission reduction replacement account, long-term certified emission reduction unit, New Zealand Greenhouse Gas Inventory, non-compliance cancellation account, overseas registry, Paris Agreement, Party, post-1989 forest land, pre-1990 forest land allocation plan, previous commitment period, relevant commitment period, removal activity, removal unit, retire, retirement account, sink cancellation account, subsequent commitment period, supervisory committee, temporary certified emission reduction replacement account, temporary certified emission reduction unit, and unit.

(2)

In section 4(1), insert in their appropriate alphabetical order:

approved overseas unit means a unit, other than a New Zealand unit, that is—

(a)

issued (as defined by this section); and

(b)

prescribed as a unit that may be transferred to accounts in the Registry

auction means an auction to sell New Zealand units under section 6A

carbon accounting area means an area of post-1989 forest land

(a)

that

(i)

is defined by a person who is registered, or has applied to register, as a participant under section 57 in relation to an activity of standard forestry or permanent forestry; and

(ii)

meets any relevant criteria specified in regulations made under this Act; or

(b)

that is constituted as a carbon accounting area by a provision of this Act

carbon accounting area (averaging) has the meaning given by section 194FC(3)

carbon dioxide equivalent, in relation to a greenhouse gas, means the amount of carbon dioxide (in tonnes) that would produce the same global warming as the amount of that gas, calculated in accordance with international climate change obligations

clear,

(a)

in relation to a tree,

(i)

includes

(A)

to fell, harvest, burn, remove by mechanical means, spray with a herbicide intended to kill the tree, or undertake any other form of human activity that kills the tree; and

(B)

to fell, burn, kill, uproot, or destroy by a natural cause or event; but

(ii)

does not include to prune or thin; and

(b)

in relation to land, means to clear (as defined in paragraph (a)) the forest species that are on the land

clear-felled, in relation to an area of land, means an area

(a)

of at least 1 hectare; and

(b)

on which any trees are cleared or killed by any form of human activity, including by felling, harvesting, burning, removing by mechanical means, or spraying with a herbicide intended to kill the tree; and

(c)

that, after that type of clearing or killing, has tree crown cover from forest species of 30% or less in each hectare

Climate Change Commission means an independent body to be established by the Minister to advise the Minister on matters relating to reducing New Zealand’s emissions

constitution date, in relation to a carbon accounting area, means,

(a)

for a carbon accounting area that is defined in an application referred to in section 188(1), the date the applicant’s registration takes effect under section 57(8); or

(b)

for a carbon accounting area that a participant applies to add under section 188(3), the date of the notice given under section 188(6)(b)(ii); or

(c)

for any other carbon accounting area, the date on which a person becomes a participant in an activity on the carbon accounting area under a provision of Part 5

deforest, in relation to forest land,

(a)

means to convert forest land to land that is not forest land (see section 181, for example); and

(b)

includes deforestation after forest land is cleared, where section 179 applies

emissions budget means the quantity of emissions that will be permitted in each emissions budget period as a net amount of carbon dioxide equivalent

emissions budget period means a 5-year period in the years 2022 to 2050 (except that the period 2022 to 2025 is a 4-year period)

emissions budget period means a 5-year period, except for the first 4-year period in the years 2022 to 2025, as specified in section 5X(3)

emissions return

(a)

means

(i)

an annual emissions return submitted under section 65; or

(ii)

a quarterly emissions return submitted under section 66; or

(iii)

a final emissions return submitted under section 118; or

(iv)

an emissions return submitted under a provision of Part 5 or Schedule 1AA; and

(b)

includes the following as if they had been submitted in that form:

(i)

an emissions return as amended by the EPA under section 120; and

(ii)

the EPA’s assessment under section 121 of the matters that should have been in an emissions return; and

(c)

includes an emissions return that shows nil liability

emissions trading scheme means (except in section 3) the greenhouse gas emissions trading scheme established under this Act

ETS participant provisions means Parts 4 to 5D of this Act

forest sink covenant means a forest sink covenant that is or was registered against land under section 67ZD of the Forests Act 1949

forestry activity means—

(a)

an activity listed in Part 1 or 1A of Schedule 3 (deforesting certain pre-1990 forest land or pre-1990 offsetting forest land); or

(b)

an activity listed in Part 1 or 1A of Schedule 4 (standard forestry or permanent forestry on post-1989 forest land)

(b)

an activity listed in Part 1 of Schedule 4 (forestry on post-1989 forest land)

forestry classification has the meaning given by in section 196A

greenhouse gas means—

(a)

carbon dioxide (CO2):

(b)

methane (CH4):

(c)

nitrous oxide (N2O):

(d)

any hydrofluorocarbon:

(e)

any perfluorocarbon:

(f)

sulphur hexafluoride (SF6)

international climate change obligations means New Zealand’s international obligations under the Convention, the Protocol, or the Paris Agreement

international transaction body means a prescribed body that confirms the validity of transactions relating to accounting of greenhouse gas emissions

issued, in relation to an approved overseas unit, means—

(a)

issued by an overseas registry; or

(b)

issued in another way and approved by an international transaction body

mandatory emissions return period means any of the following periods:

(a)

the first commitment period starting on 1 January 2008 and ending on 31 December 2012:

(b)

the 5-year period starting on 1 January 2013 and ending on 31 December 2017:

(c)

the 5-year period starting on 1 January 2018 and ending on 31 December 2022:

(d)

the 3-year period starting on 1 January 2023 and ending on 31 December 2025:

(e)

the 5-year period starting on 1 January 2026 and ending on 31 December 2030:

(f)

each consecutive 5-year period after that

New Zealand Greenhouse Gas Inventory means the reports that are required under Articles 4 and 12 of the Convention, Article 7.1 of the Protocol, and Article 13.7 of the Paris Agreement and that are prepared in accordance with section 32(1)

overseas registry means a prescribed overseas registry from which or to which units may be transferred to or from accounts in the Registry

Paris Agreement

(a)

means the Paris Agreement (under the Convention) done at Paris on 12 December 2015, a copy of the English text of which is set out in Schedule 2A; and

(b)

includes any amendments made to the Paris Agreement that are, or will become, binding on New Zealand from time to time

permanent forestry has the meaning given by section 186K

post-1989 forest land means forest land that—

(a)

is one of the following:

(i)

land that was not forest land on 31 December 1989:

(ii)

land that was forest land on 31 December 1989 but was deforested in the period beginning on 1 January 1990 and ending on 31 December 2007:

(iii)

land that was pre-1990 forest land, other than exempt land,—

(A)

that was deforested on or after 1 January 2008; and

(B)

in respect of which any liability to surrender units arising in relation to an activity listed in Part 1 of Schedule 3 has been satisfied:

(iv)

land that was pre-1990 forest land, other than exempt land, that was deforested on or after 1 January 2013 and offset by pre-1990 offsetting forest land:

(v)

land that was pre-1990 offsetting forest land that was deforested after 1 January 2013 and in respect of which any liability to surrender units arising in relation to an activity listed in Part 1A of Schedule 3 has been satisfied:

(vi)

land that was exempt land—

(A)

that has been deforested; and

(B)

in respect of which the number of units that would have been required to be surrendered in relation to an activity listed in Part 1 of Schedule 3, had the land not been exempt land, have been surrendered under section 187(2):

(vii)

land that was exempt land that has been deforested more than 8 years ago; and

(b)

is not offsetting forest land or pre-1990 offsetting forest land

pre-1990 forest land allocation plan means the allocation plan issued under section 70 in respect of pre-1990 forest land

removal activity means

(a)

an activity of standard forestry or permanent forestry (on post-1989 forest land); or

(b)

an activity that is listed in Part 2 of Schedule 4 (other removal activities)

standard forestry has the meaning given by section 186K

temporary adverse event land has the meaning given in section 194MA(1)

unit means a New Zealand unit or an approved overseas unit

(3)

In section 4(1), definition of account number, replace “section 15(1)(a)” with section 15(1).

(4)

In section 4(1), definition of eligible person, replace paragraph (d) with:

(d)

the pre-1990 forest land allocation plan

(5)

In section 4(1), definition of emissions return, replace paragraph (a)(iv) with:

(iv)

an emissions return submitted under a provision of Part 5 or Schedule 1AA; and

(6)

In section 4(1), definition of emissions return, replace paragraph (b) with:

(b)

includes the following as if they had been submitted in that form:

(i)

an emissions return as amended by the EPA under section 120; and

(ii)

the EPA’s assessment under section 121 of the matters that should have been in an emissions return; and

(c)

includes an emissions return that shows nil liability

(7)

In section 4(1), definition of exempt land, replace paragraph (a)(i) and (ii) with:

(i)

under section 183 or 183B; or

(ii)

under section 184, as long as the EPA has not declared otherwise (because a requirement or condition has been breached); but

(8)

In section 4(1), definition of general cancellation account, delete “other than sink activities being a source of emissions or a determination that New Zealand is not in compliance with Article 3.1 of the Protocol”.

(9)

In section 4(1), definition of holding account, delete “that have not been retired, surrendered, converted, or cancelled”.

(10)

In section 4(1), definition of surrender, replace “section 18CA(3) or (4)” with section 18CA(2).

(11)

In section 4(1), definition of tree weed, replace a tree with a forest species.

(12)

In section 4(2), replace “or Protocol” with “, the Protocol, or the Paris Agreement” in each place.

(13)

In section 4(6), replace “sections 62, 65, 66, 67, 118, 187, 189, 191, 192, and 193, activity or activities, in relation to a participant who submits an emissions return that shows nil liability,” with “a provision of this Act that relates to a participant who submits an emissions return that shows nil liability, activity or activities.

10 New sections 4A and 4B inserted section 4AA inserted (Greenhouse gas definition may be amended to add gases)

After section 4, insert:

4A4AA Greenhouse gas definition may be amended to add gases

(1)

The Governor-General may, by Order in Council made on the recommendation of the Minister,—

(a)

amend the definition of greenhouse gas in section 4 to add 1 or more other gases; and

(b)

if necessary, amend Schedule 1AA to set out transitional provisions for the addition.

(2)

The Minister must not make a recommendation recommend the making of an order unless the Minister is satisfied that New Zealand has international climate change obligations in relation to the additional gas or gases.

4B Transitional, savings, and related provisions

The transitional, savings, and related provisions set out in Schedule 1AA have effect according to their terms.

10A Section 5D amended (Membership of Commission)

Replace section 5D(1)(c) with:

(c)

no fewer than 3, and no more than 7, other members.

10B Section 5J amended (Commission’s functions)

(1)

After section 5J(f), insert:

(fa)

to make recommendations to the Minister about limits and price control settings for units (see section 5ZOA):

(fb)

to make recommendations to the Minister about decreased or increased phase-out rates (see section 5ZOB):

(2)

After section 5J(h), insert:

(ha)

to provide advice to the Minister (as required by section 220) on the progress that has been made towards

(i)

meeting the primary sector climate change commitments set out in Schedule 5; and

(ii)

participants in the activities listed in subpart 4 of Part 5 of Schedule 3 (for animalsfarmer participants) being ready to start complying with reporting and surrender obligations under this Act:

10C Section 5N amended (Consultation)

Replace section 5N(2)(a) with:

(a)

make publicly available, and invite submissions on, discussion papers and draft reports; and

10D Section 5ZG amended (Requirement for emissions reduction plan)

Replace section 5ZG(2) with:

(2)

The plan must be prepared and made publicly available by the deadlines specified in section 5ZI.

10E Section 5ZI amended (Minister to prepare and make emissions reduction plan publicly available)

(1)

Replace section 5ZI(2) with:

(2)

The Minister must

(a)

prepare the plan after the relevant emissions budget has been notified under section 5ZD; but

(b)

do the following at least 12 months before the commencement of the budget period:

(i)

publish the plan in the Gazette; and

(ii)

make the plan publicly available; and

(iii)

present a copy of the plan to the House of Representatives.

(2A)

However, for the plan for the first emissions budget period, the Minister

(a)

may prepare the plan before the relevant emissions budget has been notified under section 5ZD; and

(b)

must do the following before the commencement of the budget period:

(i)

publish the plan in the Gazette; and

(ii)

make the plan publicly available; and

(iii)

present a copy of the plan to the House of Representatives.

(2)

Repeal section 5ZI(4).

10F Section 5ZL amended (Commission to report at end of emissions budget period)

(1)

In section 5ZL(1), replace in the next emissions budget with for that.

(2)

Replace section 5ZL(1)(c) with:

(c)

an assessment of the amount of offshore mitigation required to meet the emissions budget for that period, taking into account the limit proposed by the Commission under section 5ZA(1)(e).

10G New subpart 6 of Part 1B inserted

After section 5ZO, insert:

Subpart 6Recommendations about making regulations

5ZOA Recommendations about limits and price control settings for units

(1)

This section applies after the Minister has set the first emissions budget.

(2)

The Commission must recommend to the Minister limits and price control settings, including any desirable emissions price path, each time the Minister is required to recommend the making of regulations under section 30GB.

(3)

The Commission’s recommendations must

(a)

cover the limits and price control settings for each year that the Minister’s recommendation must cover; and

(b)

be made in accordance with

(i)

the same requirements under sections 30GB and 30GC (except section 30GC(5)(e)) that apply to the making of the Minister’s recommendations; and

(ii)

its other duties (see sections 5M to 5O, for example); and

(c)

be given to the Minister a reasonable time before the Minister is required to recommend the making of the regulations.

5ZOB Recommendations about decreased or increased phase-out rates

(1)

The Commission must, on the Minister’s request, consider and recommend whether

(a)

a decreased phase-out rate should be set for 1 or more eligible industrial activities for a year or years (by the making or amendment of regulations under section 84A):

(b)

an increased phase-out rate should be set for 1 or more eligible industrial activities for an emissions budget period (by the making or amendment of regulations under section 84B).

(2)

The Commission must recommend that a decreased phase-out rate should be set for 1 or more eligible industrial activities if the Commission is satisfied that there is an ongoing and substantial risk that activities will be relocated outside of New Zealand to reduce emissions-related costs.

(3)

The Commission may recommend that an increased phase-out rate should be set for 1 or more eligible industrial activities if the Commission is satisfied that it is appropriate to do so, having regard to the matters listed in section 84C(3).

11 Section 6 amended (Minister of Finance may direct Registrar regarding establishment of Crown holding accounts and carry out trading activities with respect to units)

(1)

In section 6(b), after overseas registry”, insert “or international transaction body”.

(2)

In section 6(d), delete “, with any person (including any other Party)”.

12 Section 6A amended (Minister’s power to sell by auction)

(1)

In section 6A, replace “section 30G(1)(p)” with section 30GA.

(2)

In section 6A(a), after prescribed, insert individual limit and.

(3)

After section 6A(b), insert:

(c)

direct the Registrar to transfer units to any holding account in the Registry for the purposes of selling New Zealand units by auction.

13 Section 7 amended (Minister of Finance may give directions to Registrar regarding accounts and units)

(1)

Repeal section 7(1)(a)(i), (ii), (iv), (v), (vi), and (viii).

(2)

Replace section 7(1)(b) to (e) with:

(b)

transfer units between holding accounts, subject to any prescribed restriction or prohibition.

(3)

Replace section 7(2)(b)(i) with:

(i)

the transfer is required to comply with international climate change obligations; or

(4)

Repeal section 7(3).

14 Section 9 amended (Minister of Finance may obtain information from inventory agency and Registrar)

In section 9(b)(ii), replace “retired, replaced, cancelled, and carried-over” with “replaced, and cancelled”.

15 Section 10 replaced (Purpose of Registry)

Replace section 10 with:

10 Purpose of Registry

The purpose of the Registry is—

(a)

to ensure the accurate, transparent, and efficient accounting of—

(i)

the issue, holding, transfer, surrender, and cancellation of New Zealand units and approved overseas units; and

(ii)

the conversion of New Zealand units in accordance with regulations made under this Act; and

(b)

to ensure the accurate, transparent, and efficient exchange of information between the Registry, overseas registries, and international transaction bodies; and

(c)

to facilitate the exchange of information between the persons with functions, duties, and powers under this Act to enable all of them to perform their functions and duties and exercise their powers.

16 Section 13 amended (Registrar may refuse access to, or suspend operation of, Registry)

In section 13(1)(d), replace “New Zealand’s international obligations” with “international climate change obligations”.

17 Section 14 amended (Registrar must give effect to directions)

In section 14, replace “a provision in Part 4 or 5 of this Act or with “any of the ETS participant provisions or by.

18 Section 15 amended (Registrar to allocate unique numbers)

(1)

Replace section 15(1) with:

(1)

The Registrar must, in accordance with regulations made under this Act, allocate a unique account number to each account when the account is created.

(2)

Repeal section 15(2).

19 Sections 16 and 17 repealed

Repeal sections 16 and 17.

20 Section 18 amended (Form and content of unit register)

(1)

Replace section 18(2)(b) with:

(b)

the particulars of transactions, including, but not limited to, the issue, transfer, replacement, surrender, conversion, and cancellation of units; and

(2)

In section 18(3)(a), replace “retirement, replacement, surrender, carry-over,” with “replacement, surrender,”.

(3)

In section 18(3)(b)(ii), after “registries”, insert “or international transaction bodies”.

21 Section 18B amended (Closing holding accounts)

Repeal section 18B(2)(b)(ii)(A).

22 Section 18C amended (Transfer of units)

(1)

In section 18C(1)(b), after “registry”, insert “or international transaction body”.

(2)

Repeal section 18C(3).

23 Section 18CA amended (Effect of surrender, retirement, cancellation, and conversion)

(1)

In the heading to section 18CA, replace , retirement, cancellation, and conversion with and cancellation.

(2)

In section 18CA(1), replace retired, surrendered, carried-over, with surrendered,.

(3)

Replace section 18CA(2) to (5) with:

(2)

A unit that is transferred to a surrender account may only be further transferred in accordance with a direction of the Minister of Finance given under section 6 or 7 or a direction of the EPA given under section 124.

23 Section 18CA replaced (Effect of surrender, retirement, cancellation, and conversion)

Replace section 18CA with:

18CA Effect of surrender and cancellation

(1)

A unit that is transferred to a cancellation account may not be further transferred, surrendered, or cancelled.

(2)

A unit that is transferred to a surrender account may only be further transferred in accordance with a direction of the Minister of Finance given under section 6 or 7 or a direction of the EPA given under section 124.

24 Sections 18CB, 18CC, and 18CD repealed

Repeal sections 18CB, 18CC, and 18CD.

25 Section 18D amended (Succession)

(1)

Replace section 18D(2)(b) with:

(b)

the Registrar has registered the successor as the account holder.

(2)

Replace section 18D(3) with:

(3)

The Registrar may register a successor as the account holder—

(a)

on application made in the form, and payment of the fee (if any), prescribed in regulations made under this Act; and

(b)

in accordance with those regulations.

(4)

However, if the account holder is a company and any units in its holding account are vested in the Crown under section 324(1) of the Companies Act 1993,—

(a)

subsections (2) and (3) do not apply; and

(b)

the EPA must, as soon as practicable after becoming aware of the public notice about the vesting of the units that is given under section 324(3) of that Act, direct the Registrar to transfer the units to a Crown holding account and close the account holder’s holding account; and

(c)

the Registrar must comply with the EPA’s direction.

26 Section 19 repealed (Retirement of Kyoto units by the Crown)

Repeal section 19.

27 Section 20 amended (Transactions must be registered)

(1)

In section 20(1), delete “retire,”.

(2)

In section 20(2)(a), replace “the international transaction log” with “an international transaction body”.

28 Section 21 repealed (Registration procedure for Kyoto units)

Repeal section 21.

29 Section 21AA amended (Registration procedure for New Zealand units and approved overseas units)

(1)

In section 21AA(1), replace “a Minister authorised to give the direction under a provision of this Act or the EPA” with “the EPA or a Minister authorised to give the direction under this Act”.

(2)

Replace section 21AA(1)(b) with:

(b)

if the proposed transaction concerns an overseas registry or international transaction body, send a record of the proposed transaction to the overseas registry or international transaction body if required by it; and

(3)

In section 21AA(1)(c), after “registry”, insert “or international transaction body”.

(4)

In section 21AA(1)(c)(ii)(A), replace “the Minister or the EPA” with “the EPA or the Minister”.

(5)

In section 21AA(2), after “an overseas registry”, insert “or international transaction body”.

(6)

In section 21AA(2), replace “the overseas registry” with “it”.

(7)

In section 21AA(2)(b), after “registry”, insert “or international transaction body”.

(8)

In section 21AA(2)(c)(i), replace “the Minister or the EPA who gave the direction” with “the EPA or the Minister who gave the direction”.

(9)

In section 21AA(3), after “from the overseas registry”, insert “or international transaction body”.

(10)

In section 21AA(3)(c), after “registry”, insert “or international transaction body”.

30 Section 21A amended (Electronic registration)

In section 21A, delete “a provision of”.

31 Section 21B amended (Defective applications)

Replace section 21B(1) with:

(1)

If an application is defective, the Registrar may direct the applicant, in writing by electronic notification, the applicant to correct the defect within a specified period of time.

32 Section 23 repealed (Receiving Kyoto units from overseas registries)

Repeal section 23.

33 Section 23A amended (Receiving New Zealand units and approved overseas units from overseas registries)

(1)

In the heading to section 23A, after registries, insert or international transaction bodies.

(2)

In section 23A(1), (2), and (3), after overseas registry”, insert “or international transaction body” in each place.

34 Section 24 amended (Priority of registration)

In section 24(1), delete “a provision of”.

35 Section 25 amended (Correction of unit register)

(1)

In section 25(1)(a), replace “the Minister or the EPA who gave the direction” with “the EPA or the Minister who gave the direction”.

(2)

Replace section 25(3)(c)(ii) with:

(ii)

an international transaction body (if required to do so); and

36 Section 27 amended (Information accessible by search)

(1)

Replace section 27(1)(c) with:

(c)

for each account whose purpose is to hold approved overseas units, the commitment period that the Protocol provides for and that is associated with the account; and

(2)

Repeal section 27(2)(a) and (b).

(3)

Replace section 27(2)(h) and (i) with:

(h)

the total quantity of each type of approved overseas units issued during that year; and

(4)

In section 27(2)(j), replace “to the Registry from overseas registries” with “into the Registry”.

(5)

In section 27(2)(j)(iii), replace “overseas registries” with “registry or body”.

(6)

In section 27(2)(j)(iii)(A) and (B), replace “overseas registry” with “registry or body”.

(7)

In section 27(2)(k), replace “from the Registry to overseas registries” with “out of the Registry”.

(8)

In section 27(2)(k)(iii), replace “overseas registries” with “registry or body”.

(9)

In section 27(2)(k)(iii)(A) and (B), replace “overseas registry” with “registry or body”.

(10)

Replace section 27(2)(n), (o), and (p) with:

(o)

the total quantity of approved overseas units transferred during that year to any sink cancellation account; and

(p)

the total quantity of approved overseas units transferred during that year to any non-compliance cancellation account; and

(11)

In section 27(2)(q), replace “to the” with “to each”.

(12)

Repeal section 27(2)(r).

(13)

Replace section 27(2)(u), (v), and (w) with:

(u)

the total quantity of each type of unit into which New Zealand units are converted in accordance with regulations made under this Act.

(14)

Replace section 27(3)(a) and (b) with:

(a)

the total holdings in each holding account in the Registry (including any holding account held by the Crown) of each type of approved overseas unit issued in—

(i)

the first commitment period starting on 1 January 2008 and ending on 31 December 2012; or

(ii)

the second commitment period starting on 1 January 2013 and ending on 31 December 2020; and

(b)

the total quantity of each type of approved overseas unit in the Registry.

37 Section 30A amended (The Crown or Registrar not liable in relation to searches in certain cases)

Replace section 30A(b)(i) with:

(i)

an international transaction body; or

38 Sections 30B to 30D and cross-heading repealed

Repeal sections 30B to 30D and the cross-heading above section 30B.

39 Section 30E repealed (Conversion of New Zealand units into designated assigned amount units for sale overseas or cancellation)

Repeal section 30E.

40 Section 30G amended (Regulations relating to Part 2)

(1)

In section 30G(1)(b)(i)(A) and (C), after “registry”, insert “or international transaction body”.

(2)

After section 30G(1)(b)(ii), insert:

(iii)

the registration of a successor as an account holder:

(3)

Repeal section 30G(1)(d).

(4)

In section 30G(1)(e)(vi)(B), replace “the international transaction log” with “an international transaction body”.

(5)

In section 30G(1)(f) and (i), after “Part”, insert “or regulations made under this Part”.

(6)

After section 30G(1)(i), insert:

(ia)

prescribing, for the purpose of the definition of international transaction body in section 4, bodies that confirm the validity of transactions relating to accounting of greenhouse gas emissions:

(7)

In section 30G(1)(j), replace “and to which units may be transferred to and” with “or to which units may be transferred to or”.

(8)

In section 30G(1)(k), after overseas registry”, insert “or international transaction body”.

(9)

In section 30G(1)(n), replace “the terms of the Convention and the Protocol” with “international climate change obligations”.

(10)

In section 30G(1)(n), replace “the Convention or the Protocol” with “international climate change obligations”.

(11)

Repeal section 30G(1)(p) and (q).

(12)

In section 30G(4), replace “the Convention and the Protocol” with “international climate change obligations”.

41 Sections 30GA and 30GB to 30H replaced

Replace sections 30GA and 30GB to 30H 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 Council made on the recommendation of the Minister, make regulations 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 made publicly available.

(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:

(ba)

prescribing infringement offences for the breach of regulations made under this section or section 30GD, and prescribing for those offences

(i)

maximum fines not exceeding

(A)

$3,000 for an individual:

(B)

$6,000 in any other case; and

(ii)

infringement fees not exceeding

(A)

$1,000 for an individual:

(B)

$2,000 in any other case; and

(bb)

prescribing those infringement fees as different amounts for a first, second, or subsequent infringement offence:

(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 Council made on the recommendation of the Minister, make regulations 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

(a)

prescribe the following limits for a calendar year:

(i)

a limit on the New Zealand units available by auction (an individual limit); and

(ii)

a limit on the approved overseas units used (another individual limit); and

(iii)

a limit on the sum of the following (the overall limit):

(A)

the New Zealand units available by auction:

(B)

the New Zealand units available by other means:

(C)

the approved overseas units used; 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

(b)

provide that

(i)

the individual limits must not be exceeded; and

(ii)

the overall limit

(A)

restricts both the New Zealand units available by auction and the approved overseas units used, in that neither must cause the overall limit to be exceeded; but

(B)

does not restrict the New Zealand units available by other means, in that they may cause the overall limit to be 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 limits 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 limits 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 new limits 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 new limits 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 limits 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.

(8)

In this section,

approved overseas units used means the number of approved overseas units used by participants in a calendar year by, for example, being transferred to holding accounts or being surrendered

New Zealand units available by auction means the number of New Zealand units sold by auction in a calendar year

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

Example

Regulations are first made under this section in December 2019. They must prescribe the overall limits individual limits, 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 individual limits, 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 individual limits, overall limits, or price control settings; and

(b)

considering under section 30GB(4)(a) whether to recommend prescribing new overall limits individual limits, 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.

(2)

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

(a)

the emissions budget, and the nationally determined contribution for New Zealand under the Paris Agreement, that applies to

(i)

the period for which the limits or price control settings are being prescribed; or

(ii)

any period after that, if a budget or contribution exists for that period; and

(b)

the 2050 target.

(3)

However, they need not strictly accord with the budget or contribution budgets or contributions 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

(cb)

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):

(e)

the recommendations made by the Climate Change Commission under section 5ZOA:

(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.

(7)

If the Minister makes a recommendation about prescribing limits or price control settings that differs from a recommendation made by the Commission under section 5ZOA, 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)

make the report publicly available.

(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 Council made on the recommendation of the Minister, make regulations 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.

30H Consultation and commencement for certain regulations about units and auctions

(1)

This section applies to regulations made under

(a)

section 30G(1)(b)(i), (c), (j), and (k) (Part 2institutional arrangements):

(b)

section 30GA (auctions to sell New Zealand units):

(c)

section 30GB (limits and price controls for units):

(d)

section 30GD (auction monitor).

(2)

See sections 3A and 3B for consultation requirements that apply to the making of the regulations.

(3)

The regulations come into force

(a)

3 months after the date of their notification in the Gazette, or on any later date specified in the regulations; but

(b)

if the Minister considers it is in the national interest that they be made urgently, on any earlier date specified in the regulations.

42 Section 30H amended (Procedure for certain regulations relating to units)

(1)

In the heading to section 30H, after units, insert and auctions.

(2)

Replace section 30H(1) with:

(1)

Before recommending that regulations be made under section 30G(1)(b)(i), (c), (j), or (k), 30GA, 30GB, or 30GD, the Minister must be satisfied that 1 of the following has consulted the persons (or representatives of those persons) that appear to the consulter likely to be substantially affected by any regulations made in accordance with the recommendation:

(a)

the Minister or the chief executive; or

(b)

for regulations made under section 30GB, the Minister, the chief executive, or the Climate Change Commission.

(3)

In section 30H(3), delete , except regulations made under section 30G(1)(q),.

(4)

In section 30H(5), replace section 30G(1)(b)(i), (c), (d), (j), (k), (p), or (q) with the provisions referred to in subsection (1).

43 Section 30I amended (Incorporation by reference in regulations made under section 30G)

(1)

In section 30I(1)(a) and (b)(i) and (ii), replace “the Convention or the Protocol” with “international climate change obligations”.

(2)

In section 30I(4), replace “sections 163 to 165, 167, and 168” with “a relevant empowering section”.

44 New section 30IA inserted (Minister must obtain emission reductions to match reserve amounts of units released)

After section 30I, insert:

30IA Minister must obtain emission reductions to match reserve amounts of units released

(1)

This section applies if 1 or more reserve amounts of New Zealand units are released for sale at auction in a year.

(2)

The Minister must ensure, or enter into agreements that require, that greenhouse gas emissions are reduced, or removals are increased, by 1 tonne for each New Zealand unit released as a reserve amount.

(3)

The Minister must do so as soon as is reasonably practicable after the end of the emissions budget period that includes that year.

44 New section 30IA inserted (Minister must obtain greenhouse gas reductions to match certain excess units)

After section 30I, insert:

30IA Minister must obtain greenhouse gas reductions to match certain excess units

(1)

This section applies to the following New Zealand units (if any) to the extent that they cause the emissions budget for an emissions budget period to be exceeded:

(a)

the units sold by auction, after being released in a reserve amount, in that period:

(b)

the units allocated for eligible activities, or provided to participants under negotiated greenhouse agreements, in that period.

(2)

The Minister must ensure, or enter into agreements that require, that the emission of greenhouse gases is reduced, or the removal of greenhouse gases from the atmosphere is increased, by 1 tonne of carbon dioxide equivalent for each of the units, whether by domestic means or offshore mitigation.

(3)

The deadline for doing so is as soon as is reasonably practicable after the end of the emissions budget period.

45 Section 30J amended (Signing false declaration with respect to regulations made under section 30G)

(1)

In the heading to section 30J, after section 30G, insert or 30GA.

(2)

In section 30J, after “section 30G”, insert “or 30GA and that is false.

46 New subparts 3 and 4 subpart 3 of Part 2 inserted

After section 30K, insert:

Subpart 3—Infringement offences

30L Meaning of infringement offence and infringement fee

In this subpart,—

infringement fee, for an infringement offence, means the infringement fee for an infringement the offence prescribed in regulations made under this Act

infringement offence means an offence specified prescribed as an infringement offence by regulations made under this Act.

30M Regulations about infringement offences

(1)

The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations for any or all of the following purposes:

(a)

specifying the offences in this Act or regulations made under this Act that are infringement offences:

(a)

prescribing infringement offences by

(i)

prescribing a duty, restriction, or prohibition for conduct that is similar to conduct, or similar to an element of conduct, for which there is a duty, restriction, or prohibition under any of sections 30J, 30K(1), 46, 47, 48, 129, 131, 132(1)(a), (b), and (f) to (i), 259, 260, 261(1)(a), (b), (d), and (e), and 264; and

(ii)

providing that a contravention of the duty, restriction, or prohibition is an infringement offence:

(b)

for an offence in this Act or the regulations, defining a class of only some of those offences and specifying the class as an infringement offence:

(c)

prescribing, for an infringement offence, an infringement fee not exceeding

(i)

$1,000 for a person other than a body corporate:

(ii)

$2,000 for a body corporate:

(b)

prescribing for the infringement offences

(i)

maximum fines not exceeding

(A)

$3,000 for an individual:

(B)

$6,000 in any other case; and

(ii)

infringement fees not exceeding

(A)

$1,000 for an individual:

(B)

$2,000 in any other case:

(d)

prescribing those infringement fees as different amounts for a first, second, or subsequent infringement offence:

(e)

providing for any other matters contemplated by this subpart, necessary for its administration, or necessary for giving it full effect.

(2)

Before the Minister recommends the making of regulations under subsection (1)(a), the Minister must be satisfied, after consulting the Minister of Justice, that a contravention of each duty, restriction, or prohibition is sufficiently minor to be appropriate as an infringement offence.

(3)

A person may be prosecuted for, and convicted of, an offence against any provision referred to in subsection (1)(a)(i) even if their conduct is or may be an infringement offence.

30N Procedure for regulations about infringement offences

(1)

Before recommending that regulations be made under section 30M, the Minister must consult, or be satisfied that the chief executive has consulted, the persons (or representatives of those persons) that appear to the Minister or the chief executive likely to be substantially affected by any regulations made in accordance with the recommendation.

(2)

The process for consultation must include

(a)

adequate and appropriate notice of the proposed terms of the recommendation, and of the reasons for it; and

(b)

a reasonable opportunity for interested persons to consider the recommendation and make submissions; and

(c)

adequate and appropriate consideration of submissions.

(3)

Regulations made under this section come into force 3 months after the date of their notification in the Gazette, or on any later date that may be set out in the regulations.

(4)

A failure to comply with this section does not affect the validity of regulations made under section 30M.

30N Consultation and commencement for regulations about infringement offences

(1)

This section applies to regulations made under section 30M.

(2)

See sections 3A and 3B for consultation requirements that apply to the making of the regulations.

(3)

The regulations come into force 3 months after the date of their notification in the Gazette, or on any later date specified in the regulations.

30O Proceedings for infringement offences

(1)

A person who is alleged to have committed an infringement offence may—

(a)

be proceeded against by the filing of a charging document under section 14 of the Criminal Procedure Act 2011; or

(b)

be issued with an infringement notice under section 30Q.

(2)

Proceedings commenced in the way described in subsection (1)(a) do not require the leave of a District Court Judge or Registrar under section 21(1)(a) of the Summary Proceedings Act 1957.

(3)

See section 21 of the Summary Proceedings Act 1957 for the procedure that applies if an infringement notice is issued.

30P Appointment of enforcement officers

(1)

The EPA may appoint 1 or more persons who are employees of the EPA as enforcement officers to exercise 1 or more of the powers and perform the functions conferred on enforcement officers under this subpart.

(2)

Section 93(2) to (5) applies in relation to the appointment.

30Q When infringement notice may be issued

(1)

An enforcement officer may issue an infringement notice to a person if the enforcement officer believes on reasonable grounds that the person is committing, or has committed, an infringement offence.

(2)

The enforcement officer may require the person to provide their full name and any other information required so that the enforcement officer can issue the infringement notice.

30R Infringement notice may be revoked

(1)

The enforcement officer may revoke an infringement notice before the infringement fee is paid or an order for payment of a fine is made or deemed to be made by a court under section 21 of the Summary Proceedings Act 1957.

(2)

An infringement notice is revoked by giving written notice to the person to whom it was issued that the notice is revoked.

(3)

The revocation of an infringement notice under this section is not a bar to any other enforcement action against the person to whom the notice was issued in respect of the same matter.

30S What infringement notice must contain

(1)

An infringement notice must be in the form prescribed in regulations and must contain the following particulars:

(a)

details of the alleged infringement offence that fairly inform a person of the nature of the alleged offence, including, to any applicable extent, the time and place of the alleged offence:

(b)

the amount of the infringement fee:

(c)

the address of the EPA:

(d)

how the infringement fee may be paid:

(e)

the time within which the infringement fee must be paid:

(f)

a summary of the provisions of section 21(10) of the Summary Proceedings Act 1957:

(g)

a statement that the person served with the notice has a right to request a hearing:

(h)

a statement of what will happen if the person served with the notice neither pays the infringement fee nor requests a hearing:

(i)

any other matters prescribed in regulations.

(2)

The particulars contained in the notice under subsection (1)(d) must include at least 1 method of payment in person.

30T How infringement notice may be served

(1)

An infringement notice may be served on the person who the enforcement officer believes is committing or has committed the infringement offence by—

(a)

delivering it to the person or, if the person refuses to accept it, bringing it to the person’s notice; or

(b)

leaving it for the person at the person’s last known place of residence with another person who appears to be of or over the age of 14 years; or

(c)

leaving it for the person at the person’s place of business, or place of work, with another person; or

(d)

sending it to the person by prepaid post addressed to—

(i)

the mailing address recorded in a register kept by the EPA under this Act for the person or any primary representative of the person, if they are an account holder; or

(ii)

the person’s last known place of residence or place of business or work; or

(e)

sending it to,—

(i)

if the person is an account holder, the electronic address recorded in a register kept by the EPA under this Act for the person or any primary representative of the person; or

(ii)

if the person does not have a known place of residence or business in New Zealand, an electronic address of the person.

(2)

An infringement notice (or a copy of it) sent by prepaid post to a person under subsection (1) is to be treated as having been served on the person on the fifth working day after the date on which it was posted.

30U Payment of infringement fees

All infringement fees paid in respect of infringement offences must be paid into a Crown Bank Account.

30V Reminder notices

A reminder notice must be in the form prescribed in regulations, and must include the same particulars, or substantially the same particulars, as the infringement notice.

Subpart 4Regulations setting price of carbon

30W Regulations setting price of carbon

(1)

For the purpose of sections 134 to 134D and any other provisions that refer to regulations made under this section, the Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations

(a)

prescribing the methodology for specifying the price of carbon; and

(b)

specifying the price of carbon by applying the methodology.

(2)

Before making a recommendation, the Minister must take into account

(a)

the price of the units used to calculate revenue from the emissions trading scheme in the Crown annual financial statements in the preceding 12 months; and

(b)

the price of New Zealand units sold by auction in the preceding 12 months; and

(c)

any changes to the operation of the emissions trading scheme that have affected the price of the units surrendered under that scheme, or that may do so before the end of the next levy year.

(3)

Before recommending the making of regulations under subsection (1)(a), the Minister must consult, or be satisfied that the chief executive has consulted, the persons (or representatives of those persons) that appear to the Minister or the chief executive likely to be substantially affected by any regulations made in accordance with the recommendation.

(4)

The process for consultation must include

(a)

giving adequate and appropriate notice of the proposed terms of the recommendation, and of the reasons for it; and

(b)

providing a reasonable opportunity for interested persons to consider the recommendation and make submissions; and

(c)

giving adequate and appropriate consideration to submissions.

(5)

Regulations made under subsection (1)(a) may not come into force earlier than 3 months after the date of their notification in the Gazette.

(6)

A failure to comply with subsection (4) does not affect the validity of regulations made under this section.

47 Section 31 amended (Meaning of greenhouse gas)

(1)

In section 31, replace “subpart” with “Part”.

(2)

In section 31, delete “, but does not include a gas that is covered by the Montreal Protocol on Substances that Deplete the Ozone Layer”.

48 Section 32 amended (Primary functions of inventory agency)

(1)

After section 32(1)(b)(i), insert:

(ia)

New Zealand’s national inventory report under Article 13.7 of the Paris Agreement; and

(2)

Repeal section 32(1)(b)(iii).

49 Section 35 amended (Publication)

In section 35, replace “and its national communication (or periodic report) in electronic form by placing the report” with “, national inventory report, and national communication (or periodic report) in electronic form by placing the reports”.

50 Section 36 amended (Authorisation of inspectors)

In section 36(1)(c), replace “New Zealand Pastoral Agriculture Research Institute” with “AgResearch”.

50A Section 48 amended (Signing false declaration in respect of regulations made under section 50)

In section 48, after section 50, insert and that is false.

51 Section 49 amended (Reporting)

In section 49, replace “under the Convention and the Protocol” with “in accordance with international climate change obligations”.

52 Section 50 amended (Regulations)

(1)

In section 50(1)(j), replace “the terms of the Convention and the Protocol” with “international climate change obligations”.

(2)

In section 50(1)(j), replace “with the Convention or the Protocol” with “with international climate change obligations”.

(2A)

In section 50(2), replace If recommended by the Minister, the Governor-General may, by Order in Council with The Governor-General may, by Order in Council made on the recommendation of the Minister.

(3)

In section 50(2)(k), replace “the Convention or the Protocol” with “international climate change obligations”.

(3A)

In section 50(3), replace If recommended by the Minister, the Governor-General may, by Order in Council with The Governor-General may, by Order in Council made on the recommendation of the Minister.

(4)

Replace section 50(7)(b) and (c) with:

(b)

international climate change obligations.

(5)

Replace section 50(8) with:

(8)

The Governor-General may, by Order in Council, amend or replace Schedule 1, 2, or 2A so that the schedule sets out an up-to-date form of the relevant document (the Convention, the Protocol, or the Paris Agreement).

53 Section 51 amended (Incorporation by reference in regulations made under section 50)

(1)

In section 51(1)(a) and (b)(i) and (ii), replace “the Convention or the Protocol” with “international climate change obligations”.

(2)

In section 51(4), replace “sections 163 to 165, 167, and 168” with “a relevant empowering section”.

54 Section 52 amended (Inventory agency must report to Minister on certain matters before certain regulations are made)

(1)

In section 52(3)(b), replace make, as he or she thinks fit, recommendations to the Governor-General to make with recommend the making of.

(2)

In section 52(4), replace “obligations under the Convention or the Protocol” with “international climate change obligations”.

55 Section 53 repealed (Consequential amendments)

Repeal section 53.

56 Section 54 amended (Participants)

(1)

In section 54(1)(a)(i) and (2), after “section 180,”, insert “186I,”.

(2)

In section 54(1)(b)(ii), replace “section 192” with Part 5.

(3)

In section 54(2), replace “this Part or Part 5” with “the ETS participant provisions”.

57 Section 55 amended (Associated persons)

In section 55(3)(b), replace “this Part or and Part 5” with “the ETS participant provisions”.

58 Section 56 amended (Registration as participant in respect of activities listed in Schedule 3)

After section 56(4), insert:

(5)

To avoid doubt, a person does not carry out an activity listed in Schedule 3, and so does not have to notify the EPA under subsection (1)(a), merely because they

(a)

deforest pre-1990 forest land that may not be treated as deforested under section 179A(1)(b); or

(b)

deforest land that has ceased to be forest land (and pre-1990 forest land) because it has been offset by pre-1990 offsetting forest land.

59 Section 57 amended (Applicant to be registered as participant in respect of activities listed in Schedule 4)

(1)

In section 57(4)(b), replace “this Part or Part 5” with “the ETS participant provisions”.

(2)

After section 57(4)(ba), insert:

(bb)

has met any obligations incurred while previously registered in respect of the activity; and

(3)

Replace section 57(6) with:

(6)

After registering a person under subsection (5), the EPA must notify the person that they have been registered as a participant in respect of the activity and the date from which the registration will take effect.

(4)

In section 57(8), replace “section 198(2)(b), or 209(2)(b)” with section 198(2) or 209(2).

60 Section 58 amended (Removal from register of participants in respect of activities listed in Schedule 4)

(1)

Repeal section 58(3)(c).

(2)

In section 58(4), replace “section 188(7)(a)(ii), 198(3)(b), or 209(3)(b)” with “section 191AB 188(7), 198(3), or 209(3).

61 Section 59 amended (Removal from register of participants in respect of activities listed in Schedules 3 and 4)

(1)

In section 59(2)(b), delete “, and any other person specified in section 188(7)(a)(i), 198(3)(a), or 209(3)(a), as the case may require,”.

(2)

In section 59(3), replace and 211 with , 211, and 211A.

62 New sections 59A and 59B inserted section 59B inserted (Removal from register if participant never carried out activity)

After section 59, insert:

59A Removal from register for persistent non-compliance (standard forestry participants only)

(1)

The EPA may remove the name of a person from the register kept under section 57 in respect of an activity of standard forestry if

(a)

the person has not submitted an emissions return required by section 189AB by 365 days after the date on which the person was required to submit the emissions return; or

(b)

the person has not surrendered or repaid units by 365 days after the date on which the person was required to surrender or repay the units; or

(c)

the person has not paid a penalty imposed by sections 134 to 134D by a date that is both

(i)

90 days after the date on which the person was required to pay the penalty; and

(ii)

365 days after the date on which the person was required to surrender or repay the units or submit the emissions return to which the penalty relates.

(2)

However, the EPA may not rely on subsection (1)(a) to remove the name of a person from the register if

(a)

the person has submitted an emissions return under section 189AA within 365 days after the date on which the emissions return required by section 189AB was required to be submitted; or

(b)

the EPA has made an assessment under section 121 of the matters that should have been in the person’s emissions return, and

(i)

the person has surrendered any units required to be surrendered as a result of the assessment; and

(ii)

the person has paid any penalties resulting from the failure to submit the return and from the assessment.

(3)

At least 90 days before removing the name of the person from the register, the EPA must notify the person

(a)

that the EPA proposes to remove the name of the person from the register; and

(b)

of the reason for the proposed removal (for example, failure to surrender units); and

(c)

of the actions that the person may take to prevent the removal (for example, surrender the units that the person has failed to surrender).

(4)

The EPA may still take action under this section if it is unable to notify the person of its proposal to do so because it is not reasonably practicable to locate them or their address.

59B Removal from register if participant never carried out activity

(1)

The EPA must remove the name of a person from the register in respect of an activity if the EPA is satisfied that the person is not carrying out the activity and has never carried out the activity.

(2)

At least 60 days before removing the name of the person from the register, the EPA must notify the person—

(a)

that the EPA proposes to remove the name of the person from the register; and

(b)

of the reason for the proposed removal; and

(c)

of the actions that the person may take to prevent the removal (for example, provide evidence that the person carries out the activity).

(3)

The EPA may still take action under this section if it is unable to notify the person of its proposal to do so because it is not reasonably practicable to locate them or their address.

63 Section 60 amended (Exemptions in respect of activities listed in Schedule 3)

(1)

After section 60(1A), insert:

(1B)

To avoid doubt, an order made under subsection (1) may exempt a person from being a participant in respect of an activity or emissions that occurred before or after the commencement of the order.

(2)

In section 60A(2)(a) 60(2)(a), and (3)(a) and (b), replace “greenhouse gas emissions trading scheme established under this Act” with “emissions trading scheme”.

(3)

In section 60A(4) 60(4), replace “this Part and Part 5” with “the ETS participant provisions”.

(4)

Replace section 60(5) with:

(5)

See sections 3A and 3B for consultation requirements that apply to the making or revocation of an order under this section.

(5)

In section 60(6), replace make a recommendation for with recommend.

(6)

Repeal section 60(7) and (8).

64 New sections 60A and 60B inserted

After section 60, insert:

60A Exemption for participants in standard forestry or permanent forestry activity listed in Part 1 of Schedule 4

(1)

The Governor-General may, by Order in Council made on the recommendation of the Minister, exempt any person or class of persons carrying out an activity listed in Part 1 or 1A of Schedule 4 from any provision or provisions of—

(a)

Part 4 or 5; or

(b)

regulations made for the purposes of Part 4 or 5.

(2)

An order under this section may—

(a)

specify any terms and conditions of the exemption that the Governor-General thinks fit:

(b)

exempt a person generally, or in respect of a specified act, matter, or thing, or class of acts, matters, or things:

(c)

exempt a person in respect of something that occurred before the order was made:

(d)

require the EPA to deal with emissions returns or applications, update the register, or take other actions in respect of acts, matters, or things affected by the exemption.

(3)

The Minister must not recommend the making of an order under this section unless satisfied that—

(a)

the order will not materially undermine the environmental integrity of the emissions trading scheme; and

(b)

the costs of making the order do not exceed the benefits of making the order.

(4)

In determining whether to recommend the making of an order under this section, the Minister must have regard to the following:

(a)

the need to maintain the environmental integrity of the emissions trading scheme:

(b)

the desirability of minimising any compliance and administrative costs associated with the emissions trading scheme:

(c)

the relative costs of giving the exemption or not giving it, and who bears the costs:

(d)

any alternatives that are available for achieving the objectives of the Minister in respect of giving the exemption:

(e)

any other matters that the Minister considers relevant.

(5)

Before recommending the making of an order under this section, the Minister must

(a)

consult the persons that the Minister considers are likely to be substantially affected by the making of the order; and

(b)

give those persons the opportunity to make submissions; and

(c)

consider those submissions.

(6)

A failure to comply with subsection (5) does not affect the validity of the order.

(5)

See sections 3A and 3B for consultation requirements that apply to the making or revocation of an order under this section.

60B Incorporation by reference in order made under section 60 or 60A

(1)

The following written material may be incorporated by reference in an order made under section 60 or 60A:

(a)

decisions, computer programmes, rules, guidelines, principles, measures, methodologies, modalities, procedures, mechanisms, or other matters; and

(b)

standards, requirements, or recommended practices of a government agency, standard-setting organisation, or professional body.

(2)

Material may be incorporated by reference in the order—

(a)

in whole or in part; and

(b)

with modifications, additions, or variations specified in the order.

(3)

Material incorporated by reference in the order has legal effect as part of the order.

(4)

Sections 170 to 177 apply to material incorporated by reference in the order as if—

(a)

references to regulations, or regulations made under a relevant empowering section, were references to the order, or to another order made under section 60 or 60A, as appropriate; and

(b)

sections 173(2)(c) and (4)(b) and 174(1)(d) required a targeted notice instead of a notice in the Gazette, but section 174(1)(d) does not apply to material described by section 174(2)(b).

(5)

In subsection (4)(b), targeted notice means a notice to, or that is likely to come to the attention of, the persons that the chief executive considers are likely to be substantially affected by the making of the relevant regulations.

65 Section 61 amended (Requirement to have holding account)

In section 61(1)(a) and (b), replace “this Part or Part 5” with “the ETS participant provisions”.

66 Section 62 amended (Monitoring of emissions and removals)

In section 62, insert as subsection (2):

(2)

Subsection (1)(b) does not apply in relation to emissions and removals that a person is not required to calculate under

(a)

section 194FC(2), relating to carbon accounting areas (averaging):

(b)

section 194PC(3), relating to temporary adverse event land.

67 Section 63 amended (Liability to surrender units to cover emissions)

(1)

After section 63(1), insert:

(1A)

However, subsection (1) does not apply to emissions for which a participant is not liable to surrender units as a result of any of the following:

(a)

section 179A (when forest land may not be treated as deforested):

(b)

section 188AB (certain natural events or clearance for forest management):

(c)

sections 190 and 194JD(3) (limiting liability to unit balances for carbon accounting areas):

(d)

section 194FC(2) (carbon accounting areas (averaging)):

(e)

section 194PC(1) (temporary adverse event land).

(2)

Replace section 63(3) with:

(3)

If the provision of this Act that imposes a liability to surrender or repay units does not specify the deadline for doing so, the deadline is within 60 working days after the EPA gives the person a notice requiring the surrender or repayment.

(4)

See also sections 194DF and 194DG in relation to liability to surrender units when transferring between standard forestry in a carbon accounting area (averaging) and permanent forestry.

67 Section 63 amended (Liability to surrender units to cover emissions)

After section 63(3), insert:

(4)

If the provision of this Act that imposes a liability to surrender or repay units does not specify the deadline for doing so, the deadline is within 60 working days after the EPA gives the person a notice requiring the surrender or repayment.

68 Section 64 amended (Entitlement to receive New Zealand units for removal activities)

After section 64(1), insert:

(1A)

Subsection (1) does not apply to removals for which a participant is not entitled to receive units under

(a)

section 194FC(2), relating to carbon accounting areas (averaging); or

(b)

section 194PC(1), relating to temporary adverse event land; or

(c)

section 197, relating to grant-funded forests.

68 Section 64 amended (Entitlement to receive New Zealand units for removal activities)

(1)

After section 64(1), insert:

(1A)

Subsection (1) does not apply to removals for which a participant is not entitled to receive units under section 197 (grant-funded forests).

(2)

Replace section 64(3) with:

(3)

Subsection (2) does not apply

(a)

if, within 20 working days of the EPA receiving the emissions return, the EPA or an enforcement officer serves notice on the participant under section 94 requiring the participant to provide information in respect of any matter contained in the emissions return; or

(b)

to the extent that subsection (4) requires units to be transferred elsewhere.

(4)

The EPA must apply section 64A as follows:

(a)

the units the participant is entitled to receive are the potential transfer units:

(b)

the participant is the recipient:

(c)

the end of the emissions return period for the emissions return is the relevant time.

68A New section 64A inserted (Transfer of units allocated, or entitled to be received or reimbursed, less any units that must be surrendered or repaid)

After section 64, insert:

64A Transfer of units allocated, or entitled to be received or reimbursed, less any units that must be surrendered or repaid

(1)

If this section applies, the EPA must calculate the specified units (if any) by counting as follows the units that the recipient was required to, but did not, surrender, or repay to a Crown holding account, by or before the relevant time:

(a)

starting from the units that were required to be surrendered or repaid by the earliest dates; but

(b)

stopping once they equal the number of potential transfer units (if they do).

(2)

If there are any specified units, the EPA must notify the recipient of the following:

(a)

the number of specified units required for surrender:

(b)

the number of specified units required for repayment:

(c)

that the specified units will be deducted from the potential transfer units that are transferred to the recipient.

(3)

The EPA must direct the Registrar to transfer

(a)

the specified units required for surrender to a surrender account designated by the EPA; and

(b)

the specified units required for repayment to a Crown holding account designated by the EPA; and

(c)

any potential transfer units left after the specified units are deducted to the recipient’s holding account.

(4)

The transfer of the specified units for surrender or repayment satisfies

(a)

the recipient’s entitlement to be transferred those units; and

(b)

the recipient’s obligation to surrender or repay the related units.

(5)

To avoid doubt, the recipient remains liable to surrender or repay any units that are not counted as specified units (because they exceed the number of potential transfer units).

69 Section 65 amended (Annual emissions returns)

(1)

Replace section 65(1) and (1A) with:

(1)

In the period beginning on 1 January and ending on 31 March in each year,

(a)

a participant must submit an annual emissions return to the EPA in respect of each of the activities listed in Schedule 3 or Part 2, 3, or 4 of Schedule 4 that the participant carried out in the immediately preceding year:

(b)

a person who carried out an activity listed in Part 1 of Schedule 3 on pre-1990 forest land that was the subject of an offsetting forest land application must submit an annual emissions return to the EPA if

(i)

the application is declined under section 186B; or

(ii)

any of the pre-1990 forest land is removed under a variation under section 186CA; or

(iii)

approval of the application is revoked, or to be treated as revoked, under section 186G.

(1A)

An emissions return required under subsection (1)(b) must cover the period

(i)

beginning when the activity listed in Part 1 of Schedule 3 first occurred; and

(ii)

ending on the date the event referred to in subsection (1)(b)(i) to (iii) occurred,

as if that period were all part of the immediately preceding year.

(2)

In section 65(2)(b), replace section 62(b) with section 62(1)(b).

(1)

In section 65(2A)(a), replace do with does.

(3)

Replace section 65(4) and (5) with:

(4)

Following the submission of an annual emissions return under subsection (1),

(a)

a participant (other than a participant carrying out an activity listed in Part 5 of Schedule 3) must, by 31 May, surrender the number of units listed in the participant’s assessment under subsection (2)(c)(i) or recorded under subsection (2A)(b); and

(b)

a participant carrying out an activity listed in Part 5 of Schedule 3 must, by 31 May, surrender the number of units listed in the participant’s assessment under subsection (2)(c)(i) less the number of units allocated to the participant for the year to which the assessment relates under section 86BAA.

(5)

Despite the rest of this section, a participant in an activity of standard forestry or permanent forestry (on post-1989 forest land) must instead submit emissions returns as required by Part 5.

(65)

To avoid doubt, a person does not carry out an activity listed in Schedule 3, and so does not have to submit an annual emissions return under subsection (1)(a), merely because they—

(a)

deforest pre-1990 forest land that may not be treated as deforested under section 179A(1)(b); or

(b)

deforest land that has ceased to be forest land (and pre-1990 forest land) because it has been offset by pre-1990 offsetting forest land.

70 Section 67 amended (Retention of emissions records)

(1)

In section 67(1)(b), replace section 62(b) with section 62(1)(b).

(2)

In section 67(2)(a), replace section 62(d) with section 62(1)(d).

(3)

In section 67(2)(b), replace an activity listed in Part 1 of Schedule 3 or 4 with a forestry activity.

71 Section 68 amended (Issuing New Zealand units)

(1)

Replace section 68(2)(b)(i) and (ii) with:

(ii)

international climate change obligations; and

(2)

In section 68(2)(b)(iii), replace “greenhouse gas emissions trading scheme established under this Act” with “emissions trading scheme”.

(3)

In section 68(2)(c), replace “1 January 2013, and if there is no subsequent commitment period specified or determined under the Protocol or no successor international agreement to the Protocol” with “1 January 2031, and if the Paris Agreement does not provide for a commitment period that starts on that date”.

(4)

Replace section 68(2)(c)(iii) with:

(iii)

international climate change obligations; and

72 Section 69 repealed (Notification of intention regarding New Zealand units)

Repeal section 69.

73 Cross-heading above section 70 amended

In the cross-heading above section 70, delete and fishing.

74 Sections 70 to 79 replaced

Replace sections 70 to 79 with:

70 Allocation plan issued

(1)

The Climate Change (Pre-1990 Forest Land Allocation Plan) Order 2010 was made under this section to issue an allocation plan in respect of pre-1990 forest land.

(2)

The allocation plan may be revoked but not amended or replaced.

(3)

The allocation plan comes came into force on the day after the date it is was presented to the House of Representatives.

(4)

The allocation plan is a legislative instrument and a disallowable instrument for the purposes of the Legislation Act 2012 and must be presented to the House of Representatives under section 41 of that Act.

75 Section 81 amended (Entitlement to provisional allocation for eligible industrial activities)

(1)

In section 81, formula, replace the definition of variable LA with:

LA

is the level of assistance for the eligible industrial activity for the year, being,—

(a)

for a moderately emissions-intensive eligible industrial activity,—

(i)

0.6 in each year until and including 2020; and

(ii)

in each year after 2020, the level of assistance from the previous year less the applicable phase-out rate:

(b)

for a highly emissions-intensive eligible industrial activity,—

(i)

0.9 in each year until and including 2020; and

(ii)

in each year after 2020, the level of assistance from the previous year less the applicable phase-out rate

(2)

In section 81, insert as subsection (2):

(2)

In this section, the applicable phase-out rate is,—

(a)

if regulations have not been made under section 84A or 84B that relate to the eligible industrial activity,—

(i)

0.01 for each year after 2020 until and including 2030; and

(ii)

0.02 for each year after 2030 until and including 2040; and

(iii)

0.03 for each year after 2040; and

(b)

if regulations have been made under section 84A or 84B that set a different phase-out rate for the eligible industrial activity for the year, the phase-out rate set under those regulations.

76 Section 83 amended (Annual allocation adjustment)

(1)

In section 83(2), formula, replace the definition of variable LA with:

LA

is the level of assistance for the activity for the year, being,—

(a)

for a moderately emissions-intensive eligible industrial activity,—

(i)

0.6 in each year until and including 2020; and

(ii)

in each year after 2020, the level of assistance from the previous year less the applicable phase-out rate:

(b)

for a highly emissions-intensive eligible industrial activity,—

(i)

0.9 in each year until and including 2020; and

(ii)

in each year after 2020, the level of assistance from the previous year less the applicable phase-out rate

(2)

After section 83(2), insert:

(2A)

In subsection (2), the applicable phase-out rate is,—

(a)

if regulations have not been made under section 84A or 84B that relate to the eligible industrial activity,–

(i)

0.01 for each year after 2020 until and including 2030; and

(ii)

0.02 for each year after 2030 until and including 2040; and

(iii)

0.03 for each year after 2040; and

(b)

if regulations have been made under section 84A or 84B that set a different phase-out rate for the eligible industrial activity for the year, the phase-out rate set under those regulations.

(3)

Replace section 83(7) with:

(7)

If a person is required to repay units under this section, then the units repaid must be of a type that may be transferred to a surrender account at the time the units are repaid.

77 New sections 84A to 84D inserted

After section 84, insert:

84A Regulations reducing general phase-out rate

(1)

The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations that set the phase-out rate to be used by all participants for the purposes of sections 81(1) and 83(2) for a year or years beginning on or after 1 January 2031.

(2)

The phase-out rate must be

(a)

less than the rate in sections 81(2)(a) and 83(2A)(a); and

(b)

at least

(i)

0.01 for a year in the period beginning on 1 January 2031 and ending on 31 December 2040; or

(ii)

0.02 for a year in the period beginning on 1 January 2041 and ending on 31 December 2050.

(3)

The Minister may not recommend the making of regulations unless

(a)

the Climate Change Commission has recommended (under section 84D) that the phase-out rate be set at a lower rate than in sections 81(2)(a) and 83(2A)(a); and

(b)

the Minister has complied with the requirements of section 84C.

84B Regulations increasing phase-out rate for specific activities

(1)

The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations that set the phase-out rate to be used in respect of 1 or more eligible industrial activities for the purposes of sections 81(1) and 83(2) for an emissions budget period beginning on or after 1 January 2026.

(2)

The phase-out rate must be more than the rate in sections 81(2)(a) and 83(2A)(a).

(3)

Regulations made in respect of an emissions budget period must include a statement of what phase-out rate the Minister intends to set in respect of the subsequent emissions budget period.

(4)

The Minister may not recommend the making of regulations unless

(a)

the Climate Change Commission has published a report (under section 84D) considering whether the phase-out rate for the eligible industrial activity should be set at a higher rate than in sections 81(2)(a) and 83(2A)(a); and

(b)

the Minister has complied with the requirements of section 84C.

(5)

In order to apply to an emissions budget period, regulations must be made before the beginning of the emissions budget period.

(6)

Regulations may not be amended during an emissions budget period unless

(a)

the emissions budget for the emissions budget period has been revised; or

(b)

the Minister is satisfied that, since the regulations were made, there has been a significant change that affects the considerations listed in section 84C(3).

(7)

Before amending regulations, the Minister must seek advice from the Climate Change Commission under section 84D.

84C Procedure for regulations setting phase-out rates

(1)

Before recommending the making of regulations under section 84A or 84B, the Minister must

(a)

consult, or be satisfied that the chief executive or the Climate Change Commission has consulted, the persons (or representatives of those persons) that appear to the consulter likely to be substantially affected by the regulations; and

(b)

be satisfied that the regulations are consistent with meeting the emissions budget that will apply when the regulations are in force.

(2)

The process for consultation must include

(a)

giving public notice of the proposed terms of the recommendation, and of the reasons for it; and

(b)

allowing at least 20 working days for interested persons to make submissions; and

(c)

considering the submissions.

(3)

Before recommending the making of regulations under section 84B in respect of an eligible industrial activity, the Minister must consider

(a)

any targets or budgets set for reducing emissions of greenhouse gases; and

(b)

New Zealand’s nationally determined contributions under the Paris Agreement; and

(c)

the level of risk of emissions leakage (increased emissions overseas as a result of emissions reductions in New Zealand, for example an activity being relocated outside of New Zealand to reduce the emissions-related costs for the activity), based on

(i)

the emissions-related costs and policies in competing jurisdictions; and

(ii)

the markets for international trade in the products produced by the activity; and

(iii)

the ability of affected eligible persons to pass on increased costs to customers; and

(d)

the risk that the value of the allocation for the activity will exceed the cost of meeting the emissions trading scheme obligations in relation to the activity; and

(e)

other sources of supply into the emissions trading scheme, including offshore emissions reductions; and

(f)

the availability of low-emission technologies related to the activity; and

(g)

international climate change obligations; and

(h)

the proper functioning of the emissions trading scheme; and

(i)

the cost to the taxpayer of providing allocations for the activity; and

(j)

any recommendations of the Climate Change Commission; and

(k)

any other matters that the Minister considers relevant.

84D Climate Change Commission to advise on regulations setting phase-out rates

(1)

The Climate Change Commission may recommend that the Minister make regulations under section 84A if the Commission is satisfied that there is an ongoing and substantial risk that activities will be relocated outside of New Zealand to reduce emissions-related costs.

(2)

The Climate Change Commission may recommend that the Minister make regulations under section 84B if the Commission is satisfied that it is appropriate to do so, having regard to the matters listed in section 84C(3).

(3)

The Commission must make a report with its recommendations publicly available after providing it to the Minister.

(4)

The Minister must, as soon as practicable, but within 16 weeks, after receiving a report from the Commission

(a)

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

(b)

if the Minister decides not to take action recommended by the Commission, or to take different action than that recommended by the Commission, publish a report giving reasons for departing from the recommendations.

77 New sections 84A to 84C inserted

After section 84, insert:

84A Regulations setting decreased phase-out rates

(1)

The Governor-General may, by Order in Council made on the recommendation of the Minister, make or amend regulations to set a decreased phase-out rate to be used

(a)

in respect of 1 or more eligible industrial activities for the purposes of sections 81(1) and 83(2); and

(b)

for a year or years beginning on or after 1 January 2031.

(2)

The Minister must not recommend the making or amendment of regulations under this section to set a decreased phase-out rate for an eligible industrial activity unless

(a)

the Climate Change Commission has recommended (under section 5ZOB) that a decreased phase-out rate should be set for the activity; and

(b)

the Minister has considered the recommendation and complied with the requirements of section 84C.

(3)

In order to apply to a year, the regulations must be made or amended before the beginning of the year.

(4)

In this section, decreased phase-out rate means any rate that, even if it is more than a rate previously set by regulations under this section, is

(a)

less than the rate in sections 81(2)(a) and 83(2A)(a); and

(b)

at least

(i)

0.01 for a year in the period beginning on 1 January 2031 and ending on 31 December 2040; or

(ii)

0.02 for a year in the period beginning on 1 January 2041 and ending on 31 December 2050.

84B Regulations setting increased phase-out rates

(1)

The Governor-General may, by Order in Council made on the recommendation of the Minister, make or amend regulations to set an increased phase-out rate to be used

(a)

in respect of 1 or more eligible industrial activities for the purposes of sections 81(1) and 83(2); and

(b)

for an emissions budget period beginning on or after 1 January 2026.

(2)

Regulations made in respect of an emissions budget period must include a statement of what phase-out rate the Minister intends to set in respect of the subsequent emissions budget period.

(3)

The Minister must not recommend the making or amendment of regulations under this section to set an increased phase-out rate for an eligible industrial activity unless

(a)

the Climate Change Commission has recommended (under section 5ZOB) whether or not an increased phase-out rate should be set for the activity; and

(b)

the Minister has considered the recommendation and complied with the requirements of section 84C.

(4)

In order to apply to an emissions budget period, the regulations must be made or amended before the beginning of the emissions budget period.

(5)

However, the regulations may apply to an emissions budget period, despite being made or amended during that period, if

(a)

the emissions budget for the emissions budget period has been revised; or

(b)

the Minister is satisfied that, since the regulations were made or last considered, there has been a significant change that affects the considerations listed in section 84C(3).

(6)

In this section, increased phase-out rate means any rate that is more than, or the same as, the rate in sections 81(2)(a) and 83(2A)(a), even if it is less than a rate previously set by regulations under this section.

84C Procedure for regulations setting phase-out rates

(1)

Before recommending the making or amendment of regulations under section 84A or 84B, the Minister must be satisfied that the regulations or amendments are consistent with meeting the emissions budget that will apply when the regulations or amendments are in force.

(2)

See sections 3A and 3B for consultation requirements that apply to the making or amendment of regulations under section 84A or 84B.

(3)

Before recommending the making or amendment of regulations under section 84B in respect of an eligible industrial activity, the Minister must consider

(a)

any targets or budgets set for reducing emissions of greenhouse gases; and

(b)

New Zealand’s nationally determined contributions under the Paris Agreement; and

(c)

the level of risk of emissions leakage (increased emissions overseas as a result of emissions reductions in New Zealand, for example, an activity being relocated outside of New Zealand to reduce the emissions-related costs for the activity), based on

(i)

the emissions-related costs and policies in competing jurisdictions; and

(ii)

the markets for international trade in the products produced by the activity; and

(iii)

the ability of affected eligible persons to pass on increased costs to customers; and

(d)

the risk that the value of the allocation for the activity will exceed the cost of meeting the emissions trading scheme obligations in relation to the activity; and

(e)

other sources of supply into the emissions trading scheme, including offshore emissions reductions; and

(f)

the availability of low-emission technologies related to the activity; and

(g)

international climate change obligations; and

(h)

the proper functioning of the emissions trading scheme; and

(i)

the cost to the taxpayer of providing allocations for the activity; and

(j)

the recommendations made by the Climate Change Commission under section 5ZOB; and

(k)

any other matters that the Minister considers relevant.

(4)

Subsection (5) applies if

(a)

the Minister decides to recommend the making of regulations under section 84A or 84B but not as recommended by the Commission; or

(b)

the Minister decides to recommend the amending of regulations under section 84A or 84B but the Commission

(i)

recommended that they be amended differently; or

(ii)

did not recommend that they be amended at all; or

(c)

the Minister decides not to recommend the making or amending of regulations under section 84A or 84B despite the recommendation of the Commission.

(5)

The Minister must, as soon as is reasonably practicable, but within 16 weeks, after receiving the Commission’s recommendation, prepare a report of the reasons for the difference between the Minister’s and the Commission’s recommendation and

(a)

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

(b)

make the report publicly available.

78 Section 85 amended (Allocation of New Zealand units in relation to agriculture)

In section 85(2), formula, definition of variable LA, paragraph (a), replace “0.9” with “0.95”.

79 Section 85A amended (Temporary suspension of phase-out rates for assistance under sections 81, 83(2), and 85(2))

(1)

Replace the heading to section 85A with Temporary suspension of phase-out rate for assistance under section 85(2).

(2)

In section 85A(1), replace “rates” with “rate”.

(3)

In section 85A(1) and (2), replace “sections 81, 83(2), and 85(2)” with “section 85(2)”.

(4)

In section 85A(2)(a), replace “rates in those sections may not reduce the level of assistance for an eligible activity from its 2012 level or the level in the first year in which full surrender obligations are applicable for the activity (as the case may be)” with “rate in that section may not reduce the level of assistance for an eligible activity from the level in the first year in which full surrender obligations are applicable for the activity”.

(5)

In section 85A(2)(b), delete “relevant”.

(6)

Replace section 85A(3) with:

(2A)

Before recommending the making of an Order in Council under subsection (2)(a)(ii), the Minister must consider the advice of the Climate Change Commission about whether the phase-out rates should continue to be suspended.

(3)

The Minister must not make a recommendation under subsection (2)(a)(ii) before surrender obligations for the relevant participants start.

79A Section 86 amended (Applications for allocation of New Zealand units for industry and agriculture)

Replace section 86(1) with:

(1)

An eligible person who wishes to be allocated New Zealand units for an eligible industrial activity or eligible agricultural activity under this subpart must apply to the EPA in the relevant period under subsection (1A), unless this subpart otherwise provides.

(1A)

The application must be made,

(a)

for a provisional allocation for an eligible industrial activity, in the period starting on 1 January and ending on 30 April in the year in respect of which the allocation is sought:

(b)

for an allocation for an eligible industrial activity (other than a provisional allocation), in the period starting on 1 January and ending on 30 April in the year after the year in respect of which the allocation is sought:

(c)

for an allocation for an eligible agricultural activity, in the period starting on 1 January and ending on 31 March in the year after the year in respect of which the allocation is sought.

79B Section 86A amended (Provisional allocation to industry in and after 2013)

In section 86A, replace section 86(1)(a) with section 86(1A)(a).

80 Section 86B amended (Decisions on applications for allocations of New Zealand units to industry and agriculture)

(1)

In the heading to section 86B, delete and agriculture.

(2)

In section 86B(1), after section 86, insert in respect of an eligible industrial activity.

(3)

In section 86B(2)(a)(i), delete , in the case of an eligible industrial activity,.

(4)

Replace section 86B(2)(b) with:

(b)

comply with section 86BA, as long as the number of units allocated is greater than zero, even after any adjustment made under subsection (1).

81 New section 86BA inserted (Transfer of allocated units, less any units that must be surrendered or repaid)

After section 86B, insert:

86BA Transfer of allocated units, less any units that must be surrendered or repaid

(1)

This section applies to the units allocated to an applicant under section 86B, after any adjustment made under section 86B(1).

(2)

The EPA must calculate the following (an applicant’s offset units):

(a)

the units (if any) that the applicant was required to, but did not, surrender by a deadline before the start of the year to which the allocation relates:

(b)

the units (if any) that the applicant was required to, but did not, repay to a Crown holding account before the start of the year to which the allocation relates.

(3)

However, if the offset units exceed the number of allocated units, the offset units are recalculated to equal the number of allocated units by counting units as offset units starting from the units that were required to be surrendered or repaid by the earliest deadlines.

(4)

If there are any offset units, the EPA must notify the applicant of the following:

(a)

the number of offset units required for surrender:

(b)

the number of offset units required for repayment:

(c)

that the offset units will be deducted from the transfer of allocated units to the applicant.

(5)

The EPA must direct the Registrar to transfer units to achieve the following results:

(a)

the offset units required for surrender are transferred to a surrender account designated by the EPA:

(b)

the offset units required for repayment are transferred to a Crown holding account designated by the EPA:

(c)

if any allocated units remain after deducting the offset units, they are transferred to the holding account notified in the person’s application.

81 New sections 86BAA to 86BB inserted

After section 86B, insert:

86BAA Decisions on applications for allocations of New Zealand units to agriculture

(1)

This section applies if

(a)

the EPA receives an application under section 86 in respect of an eligible agricultural activity; and

(b)

the applicant has submitted any emissions returns that are due.

(2)

The EPA must decide

(a)

whether the applicant is eligible to receive an allocation in respect of the application:

(b)

if in the EPA’s opinion the applicant is eligible for an allocation, the number of units the applicant is entitled to be allocated.

(3)

If the EPA decides that an applicant is entitled to receive an allocation, then the EPA must

(a)

notify the applicant of

(i)

the number of units the applicant has been allocated; and

(ii)

the person’s right under section 144 to seek a review of the allocation decision; and

(b)

comply with section 86BB.

(4)

If the EPA decides that an applicant is not eligible to receive an allocation, then the EPA must notify the applicant of

(a)

the EPA’s decision; and

(b)

the reasons for the decision; and

(c)

the person’s right under section 144 to seek a review of the allocation decision.

(5)

The EPA must, as soon as practicable after deciding an eligible person’s allocation for an eligible agricultural activity in respect of a year,

(a)

publish the decision in the Gazette; and

(b)

ensure that it is accessible via the Internet site of the EPA.

(6)

However, the EPA is not required to publish the allocation of an eligible person for an eligible agricultural activity in respect of a year, or ensure that it is accessible via the Internet, if the EPA considers that publishing that information would be likely to prejudice unreasonably the commercial position of the eligible person who received the allocation.

86BA Transfer of allocated units to industry, less any units that must be surrendered or repaid

The EPA must apply section 64A as follows:

(a)

the units allocated to an applicant under section 86B, after any adjustment made under section 86B(1), are the potential transfer units:

(b)

the applicant is the recipient:

(c)

the start of the year to which the allocation relates is the relevant time.

86BB Transfer of allocated units to agriculture, less any units that must be surrendered or repaid

(1)

This section applies to the units allocated to an applicant under section 86BAA (the potential transfer units).

(2)

The EPA must calculate the specified units by counting units in the following order, but stopping once they equal the number of potential transfer units (if they do):

(a)

first, the units required for surrender as a result of the assessment for the year to which the allocation relates:

(b)

second, the units (if any) that the recipient was required to, but did not, surrender, or repay to a Crown holding account, as a result of an assessment for an earlier year, starting from the units that were required to be surrendered or repaid by the earliest dates.

(3)