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Update on work with the New Zealand Aluminium
Smelters
Purpose
1. This aide memoire gives you detail on work with the New Zealand Aluminium Smelters
(NZAS) on their conditional electricity contracts.
2. In early March, Hon Simeon Brown, Minister for Energy, and Hon Simon Watts, Minister
of Climate Change, directed emissions trading officials at the Ministry for the
Environment to review those contracts and provide an indication of future allocations of
emission units under them. The indication will assist NZAS with decisions on finalising
the contracts.
Actions to date
3. NZAS provided the contracts to a small number of officials and our economist on
Wednesday 27 March 2024. We have agreed to maintain very tight security on the
information due to market and commercial sensitivity.
4. 9(2)(b)(ii), 9(2)(g)(i)
5. Our analysis is underway with the development of complex models of emission cost
pass through and economic indifference. These will take time to build and be finalised.
We aim to be ready for discussion with NZAS within two weeks.
Next steps
6. We recommend that the discussions continue to be between NZAS and the small
number of emissions trading officials. This includes providing the final indication of
possible industrial allocations. The work is technical and has been carried out by officials
for several NZAS electricity contracts in the past. Sensitivities and independence are
core considerations.
7. Emissions trading officials will provide you with notice of the indication prior to
communicating it to NZAS on a no surprises basis.
8. Decisions on changes to industrial allocation to NZAS are made by Cabinet and require
the contracts to be in force. Those decisions will be informed by an analysis of the final
contracts and recommendations of Ministers.
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Signatures
Mark Vink
General Manager - Markets, Climate Change
Mitigation and Resource Efficiency
4 April 2024
Hon Simon WATTS
Minister of Climate Change
Date
Hon Simeon BROWN
Minister for Energy
Date
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