NZ ETS regulatory updates 2024: Further updates on
delegated items and waste sector impacts
Key messages
1. This briefing provides further information on two regulatory updates to the NZ ETS, for
which you have approved officials to issue drafting instructions [BRF-4916 refers].
Regulatory updates for the waste sector
2. This update corrects an error in the Climate Change (Unique Emissions Factors)
Regulations 2009 (UEF regulations) relating to how the waste sector uses historical waste
data in their emissions reporting.
Since providing you with the previous advice on these matters, al of the submitter feedback
has been considered. This has resulted in additional evidence and analysis on the impacts
of this update. The correction to regulations needs to be made, and is supported by sector
submissions, but you have choices around when the corrections come into effect.
3. A concern raised, however, was that the impact of this update on participants is estimated
to be an increase in their 2025 UEF of up to 45%. For two councils that submit ed, this
means an additional $500k to $1m required to cover their respective NZ ETS obligations.
4. Submitters have suggested deferring implementation for a year to prepare for this cost.
UEFs apply to the emissions return that covers the previous year, so this update coming
into effect on 01 January 2025 means that it applies to 2024 emissions.
5. The 45% difference in the waste UEFs is proportional to NZUs not surrendered (this is about
400,000 NZUs not surrendered by the waste sector per year). This also means that
participants are not facing the full incentive to reduce these emissions.
6. The decision on how to progress with this waste update also affects the timing and impacts
of another related waste update, which corrects an error where the waste default emissions
factors (DEFs) are not properly referenced in the UEF regulations. Both of these updates
wil require waste sector participants to reapply for their UEFs, and therefore are most
efficient and least cost if they come into effect at the same time.
Regulatory updates for the price of carbon and Synthetic Greenhouse Gas Levy rates
7. The second set of updates relate to the price of carbon, which is calculated every year on
the basis of an average NZU value from the previous year. The price of carbon then informs
Synthetic Greenhouse Gas Levy (SGGL) rates. These are routine technical updates that
involve no policy decisions, for which you have a standing delegation.
8. Tariff codes wil reflect the new price of carbon and levy rates once regulations are made.
Recommendations
We recommend that you:
In relation to the regulatory updates for the waste sector—
a.
note that the waste update to correctly reflect historical waste data (Waste Update B) fixes
an error, but there are trade-offs involved in deciding when this comes into effect, with
impacts on both the sector and the government of each option.
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b.
agree to progress with one of the following options, noting that officials recommend either
Option 1 or 3, due to the extra complexity and cost to participants created by Option 2:
(1) Consultation proposal – Make both Waste Update A (to align with default emissions
factors) and Waste Update B as proposed, to come into effect on 01 January 2025 and
apply to 2024 emissions;
Yes | No
(2) Suggested by submitters – Defer Waste Update B from coming into effect until 01
January 2026, and therefore apply to 2025 emissions. Make Waste Update A as
proposed, to come into effect on 01 January 2025 and apply to 2024 emissions;
Yes | No
(3) Aligned deferral – Defer both Waste Updates A and B for a year, to come into effect on
01 January 2026 and apply to 2025 emissions.
Yes | No
In relation to the regulatory updates for price of carbon and SGGL rates—
c.
note that officials have now received the data required to calculate the price of carbon, and
that the new price of carbon is $61.32 (approximately 13% lower than last year).
d.
note that the price of carbon is then used to calculate new SGGL rates for 2025.
Signatures
Mark Vink
General Manager
Markets Unit
Date: 04/07/2024
Hon Simon Watts
Minister of Climate Change
Date:
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NZ ETS regulatory updates 2024: Further updates on
delegated items and waste sector impacts
Purpose
1. This briefing provides additional information on two of the technical regulatory updates to
the NZ ETS, for which you have approved officials to issue drafting instructions as part of
the wider set of technical regulatory updates [BRF-4916 refers].
2. Following the receipt of further information, and completing additional analysis, officials
have developed a clearer picture of the degree of impact of one of the updates on waste
participants. A range of options are presented for mitigating this impact through when the
change is implemented.
3. Routine technical updates to the price of carbon and derived Synthetic Greenhouse Gas
Levy (SGGL) rates occur each year under a standing delegation. This update has no policy
decisions. The new price of carbon and rates are presented below for your information.
Impacts of updates on the waste sector
4. As part of the public consultation on the NZ ETS regulatory updates, we received feedback
from a range of stakeholders in the waste sector, including private landfil operators
(notably, Waste Management NZ) and local councils.
5. Al of the feedback from the sector and other relevant parties was supportive of making the
changes proposed.
6. In addition to their general support, waste sector submit ers expressed concern about the
cost of implementing one of the proposals, which corrects how historical data is used in
calculating waste emissions under the Climate Change (Unique Emissions Factors)
Regulations 2009 (UEF regulations). This was
Waste Update B in the consultation
document.
7. Waste Update B was proposed to come into effect from 01 January 2025, and therefore
affect the cost of emissions from 2024, as UEFs apply to the previous year’s emissions.
8. Notably, two councils provided specific estimations of the increase in emissions obligation
of this update, in addition to the cost of needing to reapply for their UEF:
a.
Queenstown Lakes District Council – About a 40% increase in UEF, resulting in an
additional $1m in emissions costs in 2025;
b.
Dunedin City Council – About a 45% increase in UEF, resulting in an additional $500k
in emissions costs in 2025.
9. Both councils noted that they had not hedged to cover the additional cost created by this
update, and that this cost would need to fall on rate payers in an out-of-cycle adjustment to
rates. They suggested that this could be mitigated by deferring Waste Update B by a year,
to come into effect from 01 January 2026 and apply to 2025 emissions.
10. Of icials’ assessment has determined that the impact on privately run landfil s is likely to be
similar, though these two councils wil be at the higher end of the level of impact.
11. It is worth noting that errors in the UEF regulations were identified by waste sector
participants about 2 years ago. We also signalled the direction of the new updates via the
consultation document, which was published before the end of the last financial year and
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