The BulletinJune 16, 2023

Does anyone actually want our carbon credits?


In the wake of another failed auction, the ETS is getting a shake-up – and it may mean a future with fewer pine trees, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.

Another auction, another ‘no sale’

Maybe because the result was so widely expected, Wednesday’s failed ETS auction seemed to pass with barely a raised eyebrow. Or perhaps it was because the auctions, a key part of our carbon reduction efforts, can be pretty difficult to understand. Here’s the tldr from the environment ministry: Under the emissions trading scheme, businesses must “buy and surrender to the government” one NZU (emission unit) for every one tonne of carbon dioxide-equivalent emissions they produce. These then get sold to other emitters through an auction process, with the successful purchasers gaining the right to create one tonne of carbon dioxide for every NZU they own. Olivia Wannan of Stuff’s Forever Project newsletter has a more in-depth explanation of how the bidding process works here.

So what’s going on?

This is the second failed ETS auction of the four scheduled for 2023. Unsold NZUs are added to the subsequent auction; if they aren’t sold at the end of the year they’re cancelled entirely, which would be “a win for the climate as fewer credits available means less damaging gases emitted,” explains RNZ’s Hamish Cardwell. The main reason for this week’s failed auction is likely the government’s ongoing ETS review, which is looking at ways “to put more emphasis on actually reducing gross emission rather than just planting trees” – a plan that is meeting stiff resistance from some Māori landowners, The Post reports (paywalled); Nadine Anne Hura has a useful explainer on the issues at stake here. The NZU price crashed at the end of the year after the government ignored Climate Change Commission advice that could have allowed the carbon price to rise. Now the government is out half a billion dollars and counting.

No fertiliser tax news is good news for farmers

Prime minister Chris Hipkins has ruled out introducing a fertiliser tax, citing strong opposition from the agricultural sector. But Richard Harman of Politik says opposition wasn’t quite as universal as you might think: “The tax was vaguely supported by Groundswell, the rural protest movement, which is predominantly supported by sheep and beef farmers,” he writes. “But livestock farmers in hill country do not use much nitrogenous fertiliser, whereas dairy farmers who use large volumes of urea were aghast at the idea.” Hipkins’ announcement coincided with a gloomy report from the Ministry of Primary Industries forecasting a decline in livestock numbers driven in part by “competition for farmland for afforestation (carbon farming)”. As Harman notes, this week’s second failed ETS auction may have relieved pressure on farmers “to plant forests on their hills”, at least for now.

Two more climate stories making headlines this week

On Thursday a coalition of 30 environmental groups launched Climate Shift, a campaign aimed at focusing attention on the global heating crisis as the election gets underway. Number one on Climate Shift’s 10-point action plan is “real emissions reductions”. Meanwhile, Treasury reported that tens of millions of dollars are still sitting in the Climate Emergency Response Fund (CERF), waiting to be spent. Climate change minister James Shaw told RNZ he was frustrated by the delays, but said they’re largely due to constraints on supplies and human resources, “rather than because people are sitting on their hands”.

Keep going!