The New Zealand government has committed four years of funding to the development of a supply management strategy for its emissions trading system (NZ ETS). The development of this strategy will include the consideration and design of an auctioning mechanism, on which a political decision is yet to be taken.
The funds cover both the design and potential operation of the system. The Ministry of Environment (MoE) stated that its development would require at least 18 months and that the eventual establishment of an auctioning mechanism would be preceded by consultations about the cap and its design.
Already in 2013, a provision was added to the NZ ETS legislation that allows the government to increase the supply of New Zealand units (NZUs) by auctioning allowances, while putting a cap on the number of units that could be auctioned and allocated . By developing a supply management strategy, the NZ ETS will set the groundwork for implementing this provision.
Later this year, the government will also begin a review of the NZ ETS. In particular, it will consider the effect of New Zealand’s post-2020 mitigation target on the NZ ETS.