BRF 4109 Climate change legislation programme bids 2024 Redacted.pdf

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Climate change legislation program bids
Key messages
1. This briefing requests your approval of the three draft legislation bids under the
Climate Change Portfolio. Your feedback is sought on the proposed scope of
each bid as well as the proposed priority categories. Of icials recommend that
you request that these bids, are included on the Legislation Programme for the
54th Parliament. This briefing also provides general information on the process
and timelines for legislation bids.
2. A summary of the bids has been provided below and the content included is
subject to further conversations with you.
Bid 1: Climate Change Response (Emissions Trading Scheme Agricultural
Obligations) Amendment Bil
•
Category: 2 – Must be passed before the end of 2024
•
Expected Scope:
o Repeal obligations for agriculture activities in the Climate Change
Response Act including the backstop that wil  bring surrender
obligations for agricultural emissions into the New Zealand Emissions
Trading Scheme (NZ ETS) from 1 January 2025.
•
Risks:
o Tight timeframes are required to ensure the Bil  is enacted prior to 1
January 2025. Final policy decisions wil  be sought in February 2024 to
ensure this timeframe is achievable.
o Removal of agriculture from the NZ ETS is expected to be a
contentious issue among environmental non-governmental
organisations (NGOs)
Out of scope

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e.  provide feedback on the content, timelines and priority of the proposed three
draft legislation bids in the Climate Change Portfolio 9(2)(f)(iv)

f.  note officials wil  discuss the legislative bids with you at the officials meeting on 5
February.
Signatures

Melody Guy
Katherine Wilson
General Manager – Markets
General Manager - Adaptation
Climate Change Mitigation and
Environmental Management and
Resource Efficiency
Adaptation
1 February
1 February

Hon Simon WATTS

Minister of Climate Change

Date
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the Legislation Programme at the beginning of the year to assist in planning the
timing in the House and the allocation of drafting resources.
14. 9(2)(f)(iv)

15. You are required to submit bids to the Legislation Coordinator in the Cabinet
Office by 12:00pm on Monday, 19 February 2024 (as requested in Cabinet Office
Circular CO (23) 13). The bids must be proposed in order of priority.
Bid one: Climate Change Response (NZ ETS Obligations for
Agricultural Activities) Amendment Bil
16. The Climate Change Response (NZ ETS Obligations for Agricultural Activities)
Amendment Bil  is ranked as first priority of three for this portfolio and is proposed
to be priority category 2 (to be passed before the end of 2024).
17. This Bill is specific to the New Zealand Emissions Trading Scheme (NZ ETS)
component of the National Party’s and the Government’s commitment to “keep
agriculture out of the Emissions Trading Scheme and implement a fair and
sustainable pricing system for on-farm agricultural emissions by 2030 that
reduces emissions without sending production overseas.”
18. The Climate Change Response Act 2002 (the Act) includes an NZ ETS backstop
that would introduce farm-level and/or processor-level surrender obligations from
1 January 2025. If surrender obligations are to be avoided, an amendment to the
Act is required and must be passed prior to 1 January 2025.
19. The Bill will repeal sections 2A, 2B, and Part 5 of Schedule 3 of the Act to
remove reporting and surrender obligations for both process and farm-level
agricultural activities. It wil  also repeal associated sector-specific provisions for
agriculture to enter the NZ ETS that are present throughout the Act, including
sections related to reporting, agricultural free allocation, etc.
20. To ensure the Government remains on track to implement these changes before
01 January 2025 a select committee process of 5 months is required. Paragraph
23 of the Cabinet Office circular states that “Al  bids proposing to refer a bil  to
select committee for less than six months must be discussed with the office of the
Leader of the House first, and the outcomes of that discussion recorded in the
bid” [CO (23) 13 refers].
21.
9(2)(h)

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9(2)(h)

Risks and mitigations
53. There are tight timeframes required to ensure that the Climate Change Response
(Emissions Trading Scheme Agricultural Obligations) Amendment Bil  is enacted
prior to January 2025. Policy decisions will be sought in February to ensure that
this timeframe remains achievable.
54.
Out of scope

55. 9(2)(f)(iv)



Legal issues
56. No legal issues are associated with making the legislation bids proposed in this
briefing.
Financial, regulatory and legislative implications
57. No financial, regulatory, or legislative implications are associated with making the
legislation bids proposed in this briefing.
Next steps
58. Officials will be available to discuss the draft legislation bids at the officials
meeting on 5 February
59. We are seeking your feedback on the draft bids by 12 February. Following this
we will incorporate any changes into the draft bids.
60. Final draft bids wil  be sent to your office on 15 February along with an
accompanying letter.
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Appendices
Appendix one: Draft Cover Letter - Climate Change Portfolio Legislation Bids 2024
Appendix two: Draft Cabinet Paper - Climate Change Response (Emissions Trading
Scheme Agricultural Obligations) Amendment Bil : Request for priority in the 2024
Legislation Programme
Appendix three:
Out of scope

Appendix four: 9(2)(f)(iv)

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Of ice of the Minister of Climate Change
Climate Change Response (Emissions Trading Scheme Agricultural Obligations)
Amendment Bil : Request for priority in the 2024 Legislation Programme
Summary information
1
The summary information for this Bill is:
  Portfolio of sponsoring
  Climate Change
Minister:

  Department responsible:
Ministry for the Environment

Rachel Cooper
Acting Manager, Markets Development

9(2)(a)

  Title of the proposed Bil :
Climate Change Response (Emissions
Trading Scheme Agricultural Obligations)
Amendment Bil

  Proposed ranking of Bil  within  1
the bids from this portfolio:

  Estimated size:
Medium
  Estimated complexity:
Low
  Proposed priority:
2 (must be passed before the end of 2024 if
surrender obligations are to be avoided for
fertiliser and animal processors).

Policy
2
The Government’s coalition agreements and the National Party’s Election Manifesto
commit to “Keep agriculture out of the Emissions Trading Scheme and implement a fair
and sustainable pricing system for on-farm agricultural emissions by 2030 that reduces
emissions without sending production overseas.”
3
The bil  is specific to the part to the commitment that relates to the New Zealand
Emissions Trading Scheme (NZ ETS).
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4
The Climate Change Response Act 2002 (CCRA) has reporting obligations for both
processor and farm level activities. Currently, processor level reporting obligations are in
effect, and farm level reporting obligations commence on 1 January 2025.
5
The NZ ETS backstop currently in the CCRA consists of two parts:
•  NZ ETS surrender obligations for processor-level agriculture activities, commencing
from 1 January 2025; and
•  NZ ETS surrender obligations for animal-farmers activities.
6
To remove these obligations, a bil  is required to amend the CCRA. The bil  must be
passed prior to 1 January 2025 if surrender obligations are to be avoided.
7
The bil  wil  amend the CCRA to repeal all NZ ETS obligations for agricultural activities
by repealing Part 5 of Schedule 3 to remove surrender and reporting obligations for
those activities and repealing associated sector-specific provisions. The associated
secondary legislation for calculating emissions from agriculture activities in the NZ ETS
wil  also need to be revoked.
8
To support the timeframes to repeal agricultural obligations prior to 1 January 2025
when surrender obligations wil  commence, the Bil  wil  need to be prioritised with a
priority category of 2, must be passed in 2024, if surrender obligations are to be avoided
for fertiliser and animal processors.
9
This is the first step in a sequenced process to price agricultural emissions no later than
2030 outside of the NZ ETS.
10  The removal of agriculture from the NZ ETS is expected to be contentious with
environmental non-governmental organisations who, in previous consultations related to
agriculture and the NZ ETS, have expressed frustration over the delays to pricing
agricultural emissions and raised concerns that any delay would have a detrimental
effect on the path towards mitigating agricultural emissions.
11  The Minister of Climate Change wil  lodge a Cabinet paper in February 2024 seeking
final policy decisions to inform the drafting of this legislation.
Need for legislation
12
The Climate Change Response Act 2002 establishes, among other things, key policies
to enable New Zealand to meet its climate change commitments. One of these policies
is that agricultural emissions wil  be included in the NZ ETS from 1 January 2025. This
is frequently referred to as the NZ ETS backstop. The CCRA also currently requires
agricultural processors to report on their emissions in line with NZ ETS reporting
requirements, in anticipation of surrender obligations commencing.
13
The National Party’s Election Manifesto and the Government’s coalition agreements
commit to “Keep agriculture out of the Emissions Trading Scheme and implement a fair
and sustainable pricing system for on-farm agricultural emissions by 2030 that reduces
emissions without sending production overseas.”
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To remove agricultural obligations from the NZ ETS, the CCRA wil  necessitate
amending the CCRA to remove all agricultural obligations by:
•  repealing Part 5 of Schedule 3 to remove surrender and reporting obligations for
those agriculture activities;
•  repealing associated sector-specific provisions; and
•  revoking associated secondary legislation for calculating emissions from agriculture
activities in the NZ ETS.
15
I propose this Bill be assigned priority of category 2 (must be passed in 2024) if
surrender obligations are to be avoided for fertiliser and animal processors. The
National Party’s Election Manifesto and the Government’s coalition agreements
commit to “Keep agriculture out of the Emissions Trading Scheme and implement a fair
and sustainable pricing system for on-farm agricultural emissions by 2030 that reduces
emissions without sending production overseas.”
16
If this Bil  is not passed in 2024, surrender obligations wil  commence for agriculture
processors on 1 January 2025.
17
The Climate Change Response Act has been amended in the last year. However,
these amendments were not in relation to agriculture NZ ETS obligations. In October
2023, the Minister of Climate Change deferred NZ ETS obligations for animal farmers
from 1 January 2024 to 1 January 2026 via an Order in Council [CAB-23-MIN-0457
refers]. This means that from 1 January 2026, the CCRA (as affected by the Climate
Change (Animals–Farmer Activities) Order 2023) requires animal farmers to report
their emissions, with surrender obligations commencing on 1 January 2027. At this
point surrender obligations for animal processors would cease. There is no option to
defer surrender obligations for processors in the interim.
18
I also do not propose broadening the scope of this Bil  to include amendments that
could impact timelines for the repeal of the agricultural emissions obligations.
19
A bid was made for the 2023 Legislation Programme for a Climate Change Response
(Agricultural Emissions Pricing) Amendment Bil . The bid was for the repeal of NZ ETS
obligations for agriculture activities and replacement with an alternative pricing system.
Policy work progressed but a bil  for this bid was not introduced in 2023. This Bill would
progress the repeal of NZ ETS obligations whilst work continues on an alternative
system for managing emissions from agriculture activities.
Compliance
20
This Bill is likely to comply with each of the following:
18.1  the rights and freedoms contained in the New Zealand Bil  of Rights Act 1990 and
the Human Rights Act 1993;
18.2  the principles and guidelines set out in the Privacy Act 2020;
18.3  the principles of the Treaty of Waitangi;
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18.4  the relevant international standards and obligations; and
18.5  the Legislation Guidelines (2021 edition), which are maintained by the Legislation
Design and Advisory Committee.
Binding on the Crown
21
The resulting Act wil  be binding on the Crown.
Consultation
Relevant government departments
22
The Department of the Prime Minister and Cabinet, Ministry for Primary Industries,
Treasury, Te Puni Kōkiri, and the Environmental Protection Authority were consulted
on this paper.
Public Consultation
23
In November 2022, the Government consulted on the design for an alternative
agricultural emissions pricing system. As part of this consultation submissions were
invited on an interim processor level levy system, with a similar architecture to the
processor-level backstop in the NZ ETS.
24
Most Māori submitters did not support an interim processor-level levy, likewise, the
sector’s submitters were also opposed to the interim processor-level levy citing the
blunt nature of such a levy, the uncertainty it would create for farmers, and the equity
implications of putting the levy burden on farmers who use processors. Ministers made
public a report under section 215 of the CCRA, outlining details of a farm-level pricing
system as an alternative to pricing agricultural emissions in the NZ ETS.
25
The Government consulted on deferring NZ ETS reporting obligations for animal
farmers in August 2023. Through this consultation, most sector submitters continued to
support an agricultural emissions pricing system outside of the NZ ETS as they
considered it would provide greater opportunities to develop a more effective solution.
26
Māori submitters considered that there would be increased administrative costs as a
result of animal farmers’ obligations under the NZ ETS. The majority of submissions
received who opposed the deferral expressed frustration over the delays to pricing
agricultural emissions and raised concerns that any delay would have a detrimental
effect on the path towards mitigating agricultural emissions.
27
In summary, while the sector is generally accepting of a pricing system for agricultural
emissions to serve as an incentive to drive emissions reductions, they were in favour
of a system that did so outside the NZ ETS due to its complexity and cost.
Legislation Design and Advice Committee
28
This Bill will not be referred to the Legislation Design and Advice Commit ee as it is
primarily a repeal bil  rather than creating new legislation provisions.
Government caucus and other parties in Parliament
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Date by which any policy

Not applicable, no associated
decisions for associated
secondary legislation is anticipated.
secondary legislation wil  be
before Cabinet
Date requested for
End of May 2024
introduction of the Bil
Date of report back from
October 2024
select committee
5 month Select Commit ee process. A
period shorter than 6 months is
required to enable the Bil  to be passed
in 2024, which is necessary to avoid
surrender obligations commencing
from 1 January 2025.

Date on which final policy
No substantive Amendment Paper is
approvals wil  be obtained
anticipated.
from Cabinet for any
substantive Amendment
Paper (AP) to Bil  (if already
introduced)
Date on which final drafting
Not applicable, as no substantive
instructions were or wil  be
Amendment Paper is anticipated.
sent to PCO for any
substantive AP to Bill (if
already introduced)
Date by which final drafting
Not applicable.
instructions for any
associated secondary
legislation wil  be sent to
PCO
Date of enactment
November 2024
Date of commencement
The day after

Royal assent.

Recommendations
The Minister Climate Change recommends that the Committee:
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1
note that the Bil  wil  amend the Climate Change Response Act 2002 to repeal all New
Zealand Emissions Trading Scheme obligations for agricultural activities
2
note that the Climate Change Response (Emissions Trading Scheme Agricultural
Obligations) Amendment Bill Bill ranks 2 within the bids from my Climate Change
portfolio;
3
approve the inclusion of the Climate Change Response (Emissions Trading Scheme
Agricultural Obligations) Amendment Bil  in the 2024 Legislation Programme, with a
priority of category 2 (must be passed in 2024);
4
note that priority of category 2 is sought to avoid surrender obligations for fertiliser and
animal processors and to meet the National Party’s manifesto and the Government’s
coalition agreements that commit ‘to keep agriculture out of the ETS’;
5
note that drafting instructions wil  be provided to the Parliamentary Counsel Office by
March 2024;
6
note that the Bil  should be introduced no later than the end of May 2024;
7
note that the Bil  should be passed no later than December 2024.

Authorised for lodgement

Hon Simon Watts
Minister of Climate Change
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Annex One
  Summary of priority categories

Category 1 – must be passed in 2024 as a matter of law
•  This category is reserved for legally mandated legislation, such as appropriation bil s,
or secondary legislation confirmation bil s.

Category 2 – must be passed by the end of 2024
•  This category is for legislation that must be passed in 2024, due to either a
Government commitment or other deadline.

Category 3 – a priority to be passed by the end of 2024
•  This category is for legislation for which passage in 2024 is a Government priority, but
there is no mandatory deadline.

Category 4 – to be passed by the end of 2024 if possible
•  This category is for legislation which is able to be passed within 2024, but which does
not fit into either of the above categories.

Category 5 – to proceed to select committee by the end of 2024
•  This category is for legislation which, for reasons of size, complexity, timing, or
priority, is intended to be referred to a select committee in 2024, but not be enacted
within the year.

Category 6 – drafting instructions to be issued by the end of 2024
•  This category is for legislation for which drafting instructions wil  be issued to PCO
within the year, but the legislation is not expected to be ready for introduction.

Category 7 – policy development to continue in or beyond 2024
•  This category is for legislation for which policy development is either ongoing, or
expected to commence, in or beyond 2024, but no drafting instructions are expected
to be issued by the end of 2024.

Category 8 – on hold
•  This category is for legislation which is at any stage in the legislative or policy
development process, but is currently paused and not expected to advance within
2024.

Category 9 – to be withdrawn
•  This category is for legislation which has not yet been fully drafted or introduced, and
is no longer going to proceed.

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