Submission on the Climate Change Response (Late Payment Penalties and Industrial Allocation) Amendment Bill

6 April 2023

This bill was intended to improve New Zealand's Emissions Trading Scheme (ETS) by recalibrating measures for Industrial Allocation after it was found that some exporters were receiving a windfall from extra free credits. Industrial Allocation is a feature of the ETS which provides carbon credits to some high-emissions exporters so that they will not be outcompeted by overseas exporters that are not subject to environmental regulations.

• Caritas Aotearoa New Zealand is committed to reducing emissions in line with the common good. We support efforts to strengthen the Emissions Trading Scheme in its ability to do so.

• Industrial Allocation is a policy setting that seeks to reduce global emissions, but regrettably does so at the expense of the poor. If such a policy is used, we believe it is crucial that all efforts are made to limit its extent. We therefore support amendments to improve the formula used to calculate allocation to reduce over-allocation.

• The current system is dominated by a small number of major emitters. We believe it could be positive to widen eligibility and allow firms to compete for allocation based on environmental considerations, and support this initiative.

• However, widening the scope of allocation risks increasing the amount of allocation, which would be an unjust burden on the poor and vulnerable. Therefore, we believe limits on total allocation must be put in place to prevent any increase in the future. Our support for widening eligibility is contingent on this.