OIAD-1056
22 May 2024
Adam Irish
[FYI request #26367 email]
Dear Adam Irish
Thank you for your email of 16 April 2024 requesting the following under the Of icial Information
Act 1982 (the Act):
I request under the Official Information Act how much money in each financial year for
the last 5 years has been received from the sale of Units on the Emissions Trading
Scheme (ETS). I also request what these funds have been used for. Along with how
much funding from the proceeds is retained by the EPA. I also request how much in total
in costs to run the ETS each year.
On 18 April 2023, the Ministry for the Environment (the Ministry) contacted you to clarify the
scope of your request as it was broad, and we wanted to assist you with finding the information
you are seeking. On 24 April 2024, you agreed to narrow the scope of your request down to the
following information:
•
The yearly total cost of running the entire ETS program; and
•
If the Environmental Protection Authority (EPA) retains proceeds from unit sales to pay
for this function.
We appreciate your clarification regarding the scope of your request. While the response below
addresses the points in your clarified request, it also provides more comprehensive answers to
the original questions you posed.
How much money in each financial year for the last 5 years has been received from the
sale of Units on the Emissions Trading Scheme (ETS)
Our response includes money (i.e., cash) received from the quarterly ETS auctions. Auctions
commenced in March 2021, following major reforms to the ETS that were passed in 2020.
Our response also includes money received from what is called the “Fixed Price Option” (FPO)
under the ETS. Prior to the commencement of auctions, the government did not sell units. To
meet their surrender obligations, emit ers could either purchase New Zealand carbon units
(NZUs) on the secondary market or pay the FPO. The FPO price was $25 for every NZU
equivalent, increasing to $35 in 2020.
You can find more information on the changes to the FPO, here:
Changes-to-the-Emissions-Trading-Scheme-Fixed-Price-Option.pdf (epa.govt.nz)
The Crown continues to receive cash from the FPO arising from activity in the NZ ETS for prior
periods. More information on how the FPO can still be used can be found here:
FPO-Guidance-2023_final-version.pdf (epa.govt.nz)
The table below shows money received from the sel ing of NZUs at ETS auctions and from the
FPO.
Table 1: Money received from the NZ ETS
Financial 2018/19
2019/20
2020/21
2021/22 2022/23 2023/24
Year
(to date)
ETS
-
-
1,060
2,158
793
31
Auctions
($m)
FPO ($m) 421
215
369
30
66
190
Total
421
215
1,429
2,188
859
221
($m)
It is important to note that while the ETS auctions result in the Crown receiving a cash inflow, it
must also recognise a corresponding liability on the Crown’s balance sheet. That is because
when the Crown sells an NZU at auction, that entitles the holder to use the NZU in future to meet
a surrender obligation. Similarly, when an emit er uses the FPO to meet a surrender obligation it
pays cash to the Crown instead of surrendering an NZU. This means that the Crown receives
the FPO cash, but it does not recognise the value of a surrendered NZU. In practice, the FPO
creates a loss for the Crown due to the dif erence in value between the FPO ($25 or $35) and
the market value of NZUs ($49 as at 21 May 2024).
Therefore, while the Crown receives money for the ETS, the overal impact on the Crown
accounts is more complex.
I also request what these funds have been used for.
Treasury allocates money received from the FPO to the government’s consolidated fund.
Money received from the ETS auctions was allocated to the Climate Emergency Response Fund
(CERF) until 2024. You can find more information on the CERF, here:
https://www.treasury.govt.nz/information-and-services/nz-economy/climate-change/climate-
emergency-response-fund. From 2024 revenue from ETS auctions is al ocated to the consolidated fund.
Along with how much funding from the proceeds is retained by the EPA.
The EPA does not retain any money from the ETS to fund its work.
I also request how much in total it costs to run the ETS each year.
The Ministry is responsible for ETS policy development, accounting for revenue and expenditure
relating to the surrender and allocation of NZUs, and some ETS operations including the auction
service.
The EPA operates the ETS Register and fulfils other operational functions relating to the ETS.
The Ministry for Primary Industries (MPI) performs functions relating to forestry in the ETS. The
Treasury maintains the Crown’s accounts.
Each agency incurs costs within its respective operating budgets to perform these roles.
Responsibility for the ETS sits across multiple government agencies. Because your request has
come to us for response, we have treated it as focusing on information held by the Ministry.
However, if you are interested in information specific to other agencies, you may wish to contact
those agencies for information they hold.
The information provided below relates to the Ministry’s annual costs for the past five years in
relation to the ETS. These costs reflect a combination of ETS policy and operations work. The
costs do not include the costs of support teams such as Legal and Communications.
Table 2: Annual expenditure on ETS related work programmes at the Ministry for the
Environment.
Financial
2018/19
2019/20
2020/21
2021/22
2022/23
2023/24
Year
(forecast)
Total
$2.998
$4.209
$6.084
$4.296
$5.851
$7.083
expenditure
($m)
You have the right to seek an investigation and review by the Of ice of the Ombudsman of my
decision relating to this request, in accordance with section 28(3) of the Act. The relevant details
can be found on their website at:
www.ombudsman.parliament.nz. Please note that due to the public interest in our work the Ministry for the Environment publishes
responses to requests for official informatio
n on our OIA responses page shortly after the
response has been sent. If you have any queries about this, please feel free to contact our
Ministerial Services team:
[email address]. Yours sincerely
Susan Baas
Manager – Market Assurance and Operations
Ministry for the Environment | Manatū Mō Te Taiao
