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New Zealand: Free ETS allocations phase-out announced

On the 31st July, the government of New Zealand announced the outcome of its latest ETS review and decision on phasing out of NZ Unit free industrial allocations (for Carbon) – beginning at 1% per year from 2021-2030 then increasing to 2% for 10 years, then 3%.   

This means that from 2021 fresh tomato growers will receive 1% fewer “free units”, designed to offset the cost on growers of the emissions trading scheme. All industries that receive the free units face this phase-down. The government has also indicated that some industries may face an even faster phase down if it is considered they are “at low risk of emissions leakage”. Emissions leakage means substitution by cheaper imports of higher carbon-emissions alternatives. 

The full description of the recent decisions can be found on the Ministry for the Environment website

TomatoesNZ in their submission on this review strongly advocated for retaining free unit allocations until there are viable alternative heating technologies available for growers throughout New Zealand. They, with HortNZ, will continue to press for appropriate support for growers until growers have viable alternatives to heating that are not charged under the ETS. 

Some other announcements resulting from that review were made in December 2018 and May 2019. These earlier decisions included removal of the ETS “Fixed Price Option” (FPO), i.e. the ability to purchase ETS units for a fixed price of $25 from the government, after 2019. The Fixed Price Option effectively set a maximum price on the units. However, a date still has not been set for that to occur yet.   

In summary, the New Zealand government intends for carbon emissions to continue getting more expensive. 

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