Judicial review orders Cabinet to reconsider ETS settings

Public Policy / news

Labour ministers and James Shaw have been sent back to the Cabinet table to reconsider their decision to make more ETS units available than permitted by the annual carbon budget

13th Jul 23, 6:15pm by Dan Brunskill

Climate Minister James Shaw at the first carbon auction

The High Court has ordered the Government to reconsider its 2023-2027 emissions trading scheme settings, after agreeing the initial decision was not aligned with the emissions budget.

This is a win for Lawyers for Climate Action NZ who sought the judicial review after Cabinet chose to ignore the Climate Change Commissions advice and opted for looser ETS settings.

The Commission had recommended reducing the number of units available by auction and increasing the trigger price which releases extra units.

In December, Cabinet rejected this advice and made an additional 35 million units available over the next five years at lower-than-recommended prices. This was more than one year’s worth of emissions.

Having more units available has been a factor in the repeatedly failed auctions and falling unit price in the scheme, which is supposed to be the key pillar in NZ’s climate action plan.

The legislation governing these decisions requires the settings to be aligned with the annual emissions budgets in the Zero Carbon Act. It also does not give decision makers much scope to consider other factors, such as a higher carbon price lifting household costs.

Climate Change Minister James Shaw—who is responsible for carrying out the decision but encouraged Cabinet to follow the Commission’s advice—accepted the process was flawed and needed to be redone.

This avoided the need for a two-day hearing, and High Court Justice Matthew Palmer directed the minister to reconsider the unit limits and price control settings by 30 September.

“[Shaw admits] he did not have reasonable grounds to be satisfied that the combination of settings preferred by Cabinet (and adopted by the Minister) were in accordance with the 2050 target,” Palmer said in the judgment.

Cabinet was already due to make a decision on unit limits and prices for the 2026-2028 period, and the reconsideration of 2023-2027 settings will be done alongside that decision.

This means the next ETS auction, on September 6, will continue as planned with the settings approved last December.

Bronwyn Carruthers, president of Laywers for Climate Action, thanked Shaw for cooperating and avoiding the time and expense of a full hearing.

“It is vital that the ETS settings are made in accordance with our emissions budgets and not out of political concerns about the ETS price going too high,” she said in a statement.

The December decision had eroded confidence in the scheme and contributed to the secondary market price collapse and the first two auctions of 2023 failing.

Carruthers said every lever available must be pulled to mitigate humanitarian and ecological disaster of climate change and meet the obligations in the Climate Change Response Act.

“While it will be for the Government to reconsider the ETS settings, we will be watching closely to ensure that the settings are tightened in accordance with the science,” she said.

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20 Comments

by powerdownkiwi | 13th Jul 23, 6:50pm 1689231033

Tightened in accordance with science? Couldn't agree more.But the science is not just about emissions; the science is also about WHY we emit. And that comes back to burning untold historical sunlit acres - fossil fuels - in a one-off bonanza. Those acres cannot be displaced by above-ground acres; we're using those flat-out already. And some of us are using other people's acres.

We are entering a period where more and more contention for less and less available acreage, is going to lead conflict(s). It's what we've always done when locally overshot. This, however, is a one-off; the first and only possible time we've run overshoot globally. Worse, we're trying to justify continuance (of our over-shottedness) by playing the game in money - not in resources/physics. Choosing to fly blind, in other words.

And they're in trouble - because it can't do what is required. No amount of interest-raising can solve absolute scarcity or reducing EROEI or entropy on a never-bigger scale. No amount of monetary shenanigans can create that which doesn't exist. Ultimately, Lawyers for CC is an oxymoron; by the time we're down to a sustainable-rate flow of energy through the system - originated from real-time solar acres @ 1kw/sqm (daylight hours) @ 25% efficiency - minus transmission and usage losses - we haven't the surplus energy left over to pay lawyers (not if they expect to purchase parts of the planet with their remuneration, and there's not much that isn't a planetary part).

To be really successful then, they have to stop charging. One wonders how many of them have though?

by Pietro | 14th Jul 23, 8:34am 1689280492

White hydrogen could the future. The world has vast recoverable reserves of this, according to today’s London Daily Telegraph. Bad news is that a lot of it is underneath Russia!

by powerupkiwi | 14th Jul 23, 4:51pm 1689310303

1000w/m^2 midday on a good day. The average flux of solar is two orders of magnitude lower.

by nigelh | 15th Jul 23, 9:11am 1689369102

Haven't heard from you in some time. Need to educate some on this site about the sun in NZ and what you can, or more to the point can't get out of it.

Tried NIWA's site for W/m^2 over a day for every day of the year. They have W/m^2 every h so you get a step wise function over the day. I would have preferred at least every minute or at the most five minute averaged intervals.

by Northern Lights | 13th Jul 23, 6:55pm 1689231353

So how does this work with Forest Carbon credits not going to be able to be used to offset carbon emissions from industry? I didn't notice the carbon price shooting up in response to this news. I am thoroughly confused by the whole thing.

What will forestry credits be used for if they can't be used be used to offset emissions? Or will the carbon price rise as the quantity or proportion of forestry credits allowed for offset purposes is changed by political decree.

by powerdownkiwi | 13th Jul 23, 8:52pm 1689238329

Yes, it's confusing. Most of the confusion is our inability to think physics (actually, chemistry too) instead of money.

We really have fudged the base-line; the first forests we plant, should be to replace the ones we've razed. That's an above-ground equation. It's why I planted a forest (1989-94) and DON'T claim credits; I'm replacing that which my generation consumed. Above-ground; my conscience; my social contribution.

What we're doing, is to take below-ground carbon, burning it for the energy, then not allocating energy to re-burying it. We've built an 'economy' which isn't paying its way thrice; once through drawdown of above-ground resources, and twice through drawdown of underground resources, and thrice via not mitigating the exhaust (CO2; pollutants).

But we can all keep on making money, right? And somehow if we have enough money, we can buy our way out of the crap?

Physics doesn't work like that - as Guggenheim found out in 1912....

by two_pair | 14th Jul 23, 8:37am 1689280636

Only some of the credits (NZUs) are tied to forests. Those are given to those that plant the forests to then be sold on the secondary market. The government allocated units are not directly linked to forests and are there to set an artificial cap and price on carbon emissions (this is the primary function of the scheme. Carbon offsetting is a secondary function).

by Cheetahlegs66 | 14th Jul 23, 9:19am 1689283188

Do you have a link or reference to how the ETS works? Genuinely interested. Thanks

by two_pair | 14th Jul 23, 10:21am 1689286893

https://environment.govt.nz/what-government-is-doing/areas-of-work/clim…

by powerdownkiwi | 15th Jul 23, 6:02pm 1689400966

So it's bull---t.

They will lower the cap over time - except agriculture refuses to wear a cap, and you cannot grow an economy under one so, sooner rather than later, the cap will be raised. Temporarily, of course, same as the debt we issue ourselves, with similar accompanying noises of intent.

This was a stupid attempt to apply neoliberal economics to physics, as if it was just another arena, another market. Sorry, but net energy is what does net work, and that is irrespective of proxy. Put a physical cap on by all means; lower it by all means - but understand the 'wealth' under it reduces commensurately. As for carbon - ration it, if you're serious. But, of course, we won't do that... That would be real...

by solardb | 13th Jul 23, 9:45pm 1689241540

Remember it is an election year ,the government actually subsidised fuel , and extended it. Allowing Carbon to be priced at a level that would reduce emissions was not going to happen, because it would be inflationary.

With the gloves off about a wealth /capital gains tax , we may get to hear what Shaw really thinks / wants to do with the carbon Credits. The Greens are not bluffing about going on the cross benches, many think they can achieve more in opposition. Its been that way since Clark snubbed Fitzsimons around 2000.That's akin to slapping mother Teresa in Green circles. then playing 2nd fiddle to Winston in 2017.

by Driftwood | 14th Jul 23, 8:07am 1689278877

The carbon zero act is flawed. Some of the politicians who rode this brand wagon to the top are starting to see this and are trying to wiggle out.

Energy underpins very thing in our society. The war on the fossil fuel component and the inability of wind and solar to completely replace it drives shortages, inflation and geopolitical instability.

Ironically these well meaning lawyers are bringing the issue to a head. A rethink will be required if we want to maintain our affluent standard of living.

Germany is ahead on the curve on this, their solution is to embed the same high end carbon taxes they pay into trade agreements to level the competition to save their industry.

This might work if they can get the whole world on the wagon, proud little green NZ have jumped but there will be many notable exceptions that will continue to suck industry out of the green revolution block.

Be prepared for a train wreck.

by powerdownkiwi | 14th Jul 23, 8:39am 1689280760

'A rethink will be required if we want to maintain our affluent standard of living.'

You cannot maintain a way of life predicated on a finite resource you're half-way through. Sorry. Yes, we are headed for a train-wreck, but the Green New Deal types are opening the throttle while the neocons are shoveling the coal.

by Beanie | 14th Jul 23, 8:58am 1689281913

"You cannot maintain a way of life predicated on a finite resource you're half-way through."

The problem is YOU probably can. Your descendants, well.. that's for them to figure out as the train cartwheels off the tracks.

by solardb | 14th Jul 23, 9:02am 1689282162

They might figure out the way to deal with it is to rise up against the old folks who ignored the warnings, and carried on using.

by powerdownkiwi | 15th Jul 23, 5:48pm 1689400093

The end-game is developing now.

Depends on how long you're planning on hanging around.

by Let me be Frank | 14th Jul 23, 8:59am 1689281994

A non solution to an unsolvable problem.

it is all window dressing.

by nigelh | 14th Jul 23, 9:41am 1689284502

We seem to have the usual band talking about science and physics. Also modern science and physics as far as CC alarmists are concerned is based on consensus and models.

Try skeptical science started by a comedian and web developer. Has PhD in Cognitive Science. What science degrees will they think of next. He is/was a postdoctoral research fellow at the Climate Change Communication Research Hub at Monash University who advises Facebook. Also a Senior Research Fellow at the Melbourne Centre for Behaviour Change.

Sounds like a fancy name for one of those govt ministrys in George Orwells 1984. Ministry of Truth comes to mind.

by Palmtree08 | 14th Jul 23, 2:30pm 1689301834

"Consensus and models"? You forgot to mention hard data.

Consensus and models are still better than fake science, ignorance, economic ideologues, fundamentalist fairy worship, immunity to reality and politicians paid to shaft the planet by polluters etc, on the denial side of the ledger.

Meanwhile the planet keeps heating.

by powerdownkiwi | 15th Jul 23, 5:45pm 1689399928

We've had all the hard data we need - not just about CC, but about the polycrisis.

It amazes me that grown (as in age) people can so blinker themselves.