New penalties that apply to agriculture participants

If you fail to submit an emissions return by the due date, and other criteria are satisfied, a penalty may be issued. This penalty is based on emissions and may be substantial.

There is also a new penalty for submitting an incorrect emissions return. This will apply if we need to make an amendment to an emissions return, and are satisfied that you failed to take reasonable care. This penalty may be substantial, particularly if you knowingly failed or made an error. 

Voluntary disclosure is a factor we take into consideration when calculating the penalty outcome, so it is recommended you let us know promptly if you have made a mistake.

We will be publishing guidance on the new penalties in December 2020.

There has been a change in the requirements for being a participant in the ETS for the activity of mining coal. For the 2021 reporting year onwards, you will be a participant if you own a stockpile of least 2,000 tonnes of coal that comes directly from your mining operation.

For 2021 emissions reporting onwards, you are now considered a participant if you meet one or both of the criteria below:

• Mining more than 2,000 tonnes of coal in the reporting year (direct coal mining)
• Owning at least 2,000 tonnes of coal from direct coal mining, at the start of the year, and where the year is immediately after (coal stockpiling)
• A year of direct coal mining or a year or more of owning at least 2,000 tonnes of coal (from direct coal mining) at the start of the year, after an initial year of direct coal mining.

For example: a person mines 2,500 tonnes of coal in 2022, which is direct coal mining and therefore mining coal in 2022. They stop direct coal mining, but still own (from their mining) 2,250 tonnes of coal at the start of 2023 and 2,000 tonnes at the start of 2024. This is coal stockpiling. Therefore they are mining coal in 2023 and 2024, and must report the coal stockpiling in their emissions return.

Emissions returns for mining coal will be updated for 2021 returns will include questions on coal stockpiling. You will need to keep accurate stockpile records for this purpose.

Key changes you need to know about

• New penalties have been introduced that may have significant financial consequences if you fail to submit adjustments to any provisional allocation application by the due date, or if you provide incorrect information on your allocation application or adjustment. The penalties apply from 1 January 2021.
• The phasing out of industrial allocations begin in 2021. The new general phase out rates will show up in provisional allocation applications from 2021, and in the closing and final allocation applications from 2022.
• If you are due to receive units through an industrial allocation, and you have an outstanding obligation (to surrender or repay units), this obligation will be automatically deducted from the units you are entitled to receive.

Adjustments to previous years’ provisional applications

If you apply for a provisional allocation, you receive your entitlement in advance, based on your production for the previous calendar year. To adjust or ‘square up’ your entitlement with what you actually produced, you’re required to make an allocation adjustment in the next application period. If you apply for a provisional allocation in the following year, this adjustment will automatically calculate when you enter the figure for your previous year’s production.

However, if you no longer wish to receive entitlements in advance, you will need to submit an annual adjustment, or, if you are not continuing with the activity, submit a closing allocation application.

New penalties

If you fail to submit an adjustment to a provisional application (by completing either a new provisional, an annual adjustment or a closing application), by the due date, and other criteria are satisfied, a penalty may be issued. This penalty is based on units the person is entitled to receive, or required to repay, and may be substantial.

A penalty may apply if you provide incorrect information in an allocation application or adjustment. This will apply if we need to make changes to an allocation decision, and are satisfied you failed to take reasonable care. This penalty may be substantial particularly if you knowingly failed or made an error.

Voluntary disclosure is a factor we take into consideration when calculating the penalty outcome, so it is recommended you let us, the EPA, know immediately if you have made a mistake.

If you fail to repay units by the due date a penalty will automatically apply. Each overdue unit will incur a penalty of 3 x the price of carbon on the due date. This penalty may be substantial. We do not have discretion to reduce this penalty. A repayment may apply to industrial allocation recipients if you made an error, or stopped producing having already received a provisional application for the year.

We will be publishing guidance on the new penalties in December 2020.

Industrial allocation phase-out

The Amendment Act has introduced the phase out of industrial allocations from 2021 through two complementary approaches:

1. A general phase out rate; starting at an annual rate of 1 per cent for both moderately intensive activities and highly emissions-intensive activities for the period 2021-2030.
2. A legislated process which enables the Minister of Climate Change to set decreased or increased phase-out rates for one or more activities.

The general phase out rate for all industrial allocation activities from 2021 - 2030 is one percentage point (0.01). This means that levels of assistance will reduce from 0.9 to 0.89 (for highly emissions-intensive activities), and from 0.6 to 0.59 (for moderately emissions-intensive activities), in the first year.

The new general phase out rates will show up in provisional allocation applications from 2021, and in the closing and final allocation applications from 2022 (for industrial allocation applications for the 2021 year).

There are a number of changes that affect forestry ETS participants.

Emissions Trading Scheme improvements for forestry - Ministry for Primary Industries

Find out more about ETS improvements for forestry - Ministry for the Environment

We are required to publish data about participants’ returns (emissions or removals) and information about certain penalties imposed. We will give at least 10 working days’ notice of publication. The notice will be via the EPA and Emissions Trading Register websites. The data will then be published in the ETS Reports area of the EPA website after 30 June 2021.

See the Emissions Trading Reports

Fixed Price Option 

The Fixed Price Option (FPO) or the ability to pay money instead of surrendering or repaying units, increased from $25 to $35, for participants to use to cover emissions in 2020. The FPO will remain in place during the transition to auctioning.

The FPO is also now available for surrenders/repayments arising as a result of an amendment to, or a default assessment of, an emissions return for activities that occurred in the 2020 calendar year or earlier, where a notice under s 123 of the CCRA was issued after the law change on 23 June 2020. 

The last calendar year the FPO will be available will be for those activities taking place in 2020. 

Read the guidance on when to use the fixed price options (PDF 240 KB)

Find out more about price controls in the New Zealand Emissions Trading Scheme - Ministry for the Environment

Payment arrangements

If you are not in a financial position to pay a new penalty by the due date, you will be able to request to enter into a deferred payment arrangement (for example, to pay by instalments or at a later date). The deferred payment arrangements will be subject to interest charges.

Auctioning in the NZ ETS has been introduced.

The auction operator NZX will be running a webinar on 19 January 2020. In the webinar, they'll show the auction platform and provide further details on how to register for auctioning.

Test auctions are being run from 27-28 January 2021. This is a chance to experience the auctions and test your own processes.

Register your organisation for test auctions

You must register by Wednesday 20 January 2020 to participate.

To receive ongoing information about auctioning, or if you have any questions, email your details to NZX at auctions@nzx.com.

Auctioning in the New Zealand Emissions Trading Scheme - Ministry for the Environment

1. Keep your contact details in the Register up-to-date.
2. Understand your Register roles and ensure correct roles are in place well in advance of the deadlines.
3. Prepare and submit returns well in advance of the deadlines.
4. Keep good records, provide information if requested and let the EPA know promptly if you have made a mistake.