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Climate Change legislation programme bids 2024 -
final approval
Key messages
1. This briefing requests your approval of the four legislation bids under the Climate
Change Portfolio. Your review of the updated bids is sought following the
incorporation of your feedback provided on 8 February. A summary of changes to
each bid has been provided below.
2. 9(2)(f)(iv)
3. Officials recommend that you request that these bids are included on the
Legislation Programme for the 54th Parliament.
4. You are required to submit the 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). A cover letter prepared for this purpose is attached.
Summary of updates
Bid 1: Climate Change Response (Emissions Trading Scheme Agricultural
Obligations) Amendment Bill
• Timeline section has been updated to match Cabinet dates.
Out of scope
9(2)(f)(iv)
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• 9(2)(f)(iv)
9(2)(f)(iv)
Recommendations
We recommend that you:
a. 9(2)(f)(iv)
Yes | No
b.
note the updates to the legislative bids following your feedback on 8 February
Yes | No
c.
approve the proposed priority categories for the following the four Climate
Change Portfolio bids to be submitted for inclusion in the Legislation Programme:
i
bid one: Climate Change Response (Emissions Trading Scheme Agricultural
Obligations) Amendment Bill – Category 2 (must be passed before the end of
2024)
ii Out of scope
iii 9(2)(f)(iv)
Yes | No
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Signatures
Susan Baas
Acting General Manager- Markets
15/02/2024
Hon Simon WATTS
Minister of Climate Change
Date
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Appendices
Appendix 1 - Draft Cover Letter - Climate Change Portfolio Legislation Bids 2024
Appendix 2- Climate Change Response (Emissions Trading Scheme Agricultural
Obligations) Amendment Bill (Category 2 – must be passed in 2024)
Appendix 3- Out of scope
Appendix 4- Appendix withheld in full under section 9(2)(f)(iv) of the Act
Appendix 5- Appendix withheld in full under section 9(2)(f)(iv) of the Act
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Office of the Minister of Climate Change
Climate Change Response (Emissions Trading Scheme Agricultural Obligations)
Amendment Bill: 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
Cheryl Moir
Acting Manager, Markets Development
9(2)(a)
Title of the proposed Bill:
Climate Change Response (Emissions
Trading Scheme Agricultural Obligations)
Amendment Bill
Proposed ranking of Bill 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 bill 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 bill is required to amend the CCRA. The bill must be
passed prior to 1 January 2025 if surrender obligations are to be avoided.
7
The bill will 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
will also need to be revoked.
8
To support the timeframes to repeal agricultural obligations prior to 1 January 2025
when surrender obligations will commence, the Bill will 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 will 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 will 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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14
To remove agricultural obligations from the NZ ETS, the CCRA will 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 Bill is not passed in 2024, surrender obligations will 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 Bill 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 Bill. 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 bill 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 Bill 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 will 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 Committee as it is
primarily a repeal bill rather than creating new legislation provisions.
Government caucus and other parties in Parliament
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29
I will consult with the Government caucus and other parties in Parliament as necessary
to support the introduction of this Bill.
Secondary legislation
30
Secondary legislation is not anticipated to be required to give effect to the provisions of
the Bill. The Bill will revoke sector-specific secondary legislation used for the
calculation of emissions under the NZ ETS for these activities.
Timeline
31
The Bill must come into force prior to 1 January 2025, as set out in paragraph 10.
32
The proposed timing for the bill is set out in the table below.
33
9(2)(h)
Step
Proposed date
Consistency assurance
Date on which final policy
March 2024
Consultation undertaken in 2022
approvals were, or wil be,
and 2023 as summarised above
obtained from Cabinet
Date on which complete
April 2024
drafting instructions were or
wil be sent to PCO
Date by which the Bil will
Not applicable
be released for exposure
draft (if an exposure draft is
planned)
Date by which the Bil will
May2024
go to the Ministry of Justice
(or Crown Law if applicable)
for an assessment of
consistency with the New
Zealand Bil of Rights Act
1990
Dates on which the Bil wil May 2024
be before LEG and Cabinet
for approval for introduction
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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
June 2024
introduction of the Bil
Date of report back from
November 2024
select committee
4 month Select Committee 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 Bil (if
already introduced)
Date by which final drafting
Not applicable.
instructions for any
associated secondary
legislation wil be sent to
PCO
Date of enactment
December 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 Bill will 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 Bill 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 will be provided to the Parliamentary Counsel Office by
March 2024;
6
note that the Bill should be introduced no later than June 2024;
7
note that the Bill 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 bills,
or secondary legislation confirmation bills.
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 will 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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