Tuesday, July 25, 2023

Climate Change: Unfucking the ETS

Earlier in the month Lawyers for Climate Action won a historic victory, overturning labour's 2022 ETS settings decision, which had crashed the carbon market. The courts told the government to go back to the drawing board and do it again and come up with ETS settings that complied with the law. Today, the government released its response. The full settings are here, and they have largely followed the Climate Commission's advice. On price, they've adopted the Commission's advice completely, so from December we'll have a CCR trigger price of $173, and from next year we'll have a two-tier CCR triggering at $184 and $230. Which is high enough that it should never happen, meaning those units will never be released. On volume - the measure which matters - they've differed a little from the Commission advice, likely because they're trying to mash two sets of Commission advice together. But the court-granted ability to adjust this year's settings means they've ripped 2.9 million tons out of 2023, giving a number even lower than that originally recommended by the Commission. The table below shows auction volumes without the CCR, to make them easy to compare (the 2023 Commission figures are adjusted to account for the fact that there has been no CCR release in 2023):

YearCurrent settingsNew settingsCC 2022 (p45)CC 2023 (p 42, ignoring step 7a)
Total (2023-7)75.561.668.5-
Total (2024-8)-53.5-51.1

So, they've unfucked their previous decision, and once you account for ripping 2.9 million tons out of 2023, actually come in half a million tons lower than the Commission's pathway.

This is a pretty good result, and might finally restore some sanity to the ETS and let it actually function. At least until National breaks it again.