Regulations banning the use of certain international units in the ETS
What’s happening?
Climate Change Minister Tim Groser has announced that the following international emission units are banned from surrender in the Emissions Trading Scheme (ETS) due to concerns over their environmental integrity (effective 18 December 2012):
- Emission Reduction Units (ERUs) generated from HFC-23 and N2O industrial gas destruction projects
- Certified Emission Reduction units (CERs) and ERUs generated from large-scale hydropower projects (greater than 20 MW capacity) that do not meet the guidelines in the World Commission on Dams’ final report: Dams and Development: A New Framework for Decision Making.
This means participants in New Zealand’s ETS cannot surrender these units to meet their obligations under the scheme.
Any units brought by New Zealand companies, on forward contracts, will be exempt from the ban until June 2014. But the forward contracts must have been entered into before 17 December 2012.
This decision follows consultation undertaken in November 2012 by the Ministry for the Environment.
Why are these units being banned?
Banning these units now strengthens the credibility of our ETS and therefore our ability to advance discussions on linking with other major domestic emission trading schemes. Building regional and bilateral linkages amongst carbon markets beyond 2015 will be important, given lack of access to Kyoto markets beyond this point.
New Zealand continues to have access to existing Kyoto carbon markets at least until 2015 and continuing to allow these units to be accepted in our scheme until 2015 would likely damage our reputation given the concerns about their environmental integrity.
What about participants who have already purchased these units?
Any units held in the New Zealand Emission Unit Register at the time the regulations came into force (18 December 2012) may be used to meet ETS obligations. In addition, an exemption is provided until 1 June 2014 for units purchased under forward contracts that were in place before 17 December 2012.
What do I have to do to get an exemption?
To be eligible for an exemption, an account holder must provide to the Registrar by 11 February 2013:
a. a copy of the forward contract and
b. a statutory declaration by the account holder that the forward contract was entered into before 17 December 2012.
How do I identify banned CERs?
It is the participant's responsibility to identify units which are banned. The Ministry for the Environment has issued guidance to help participants identify these units.
See Guidance on the use of Emission Reduction Units and Certified Emission Reduction units in the ETS (PDF, 484 KB) .
Last updated: 17 December 2012
