NEW ZEALAND Law and Practice Contributed by: Josh Williams, Anderson Lloyd
explicitly directed toward achieving domestic emis - sions budgets and the 2050 target. • Adjustment to settings process – the process for reviewing ETS unit volumes and price control set - tings is transitioning from annual to less frequent (generally biennial) updates, providing increased stability for market participants. • Changes to unit supply and market settings – the government has reduced the number of NZUs available through auction over the medium term, in part to manage surplus units and support price signals. • Expanded scope of removals – the government is developing frameworks to recognise a broader range of carbon removals beyond traditional for - estry activities, including nature-based and techno - logical sequestration methods. • Operational flexibility – amendments introduce greater administrative flexibility in areas such as compliance, reporting timelines and management of disruptions affecting participants. The ETS continues to play a central role in New Zea - land’s emissions reduction framework. However, recent reforms indicate a shift toward increased flex - ibility, greater reliance on domestic mechanisms, and a rebalancing of the role of forestry and removals rela - tive to gross emissions reductions. Carbon Removals Assessment Framework The government has also introduced a Carbon Removals Assessment Framework to enable recog - nition of a broader range of sequestration activities beyond forestry. These include wetland restoration, peatland rewetting and other nature-based or tech - nological removal mechanisms. This represents a sig - nificant expansion of the policy approach to carbon removals, and is expected to open new opportunities for landowners and project developers. 3.2 Carbon Pricing and Trade Impacts European Union Carbon Border Adjustment Mechanism (CBAM) Cement, aluminium, fertilisers, electricity, hydrogen, iron and steel exports to the EU from New Zealand will have to report, and eventually pay for (where required), the embedded carbon emissions in those products.
This is to occur on the same basis as where those products are exported to the EU by other countries. While this is estimated to only impact <0.20% of New Zealand’s exports at this stage, these sectors will like - ly be required to pay the carbon tariff (once payments are required) as the price of emitting in the EU’s emis - sions trading scheme has historically been higher than in New Zealand’s ETS. Should the EU decide to extend the scope of CBAM to agriculture in the future, it will have a much greater effect on New Zealand. 4. Liability for Climate Change and ESG Reporting 4.1 Liability for Climate Change and ESG Reporting Mandatory Climate-Related Financial Disclosures In 2023, New Zealand passed legislation making cli - mate-related disclosures mandatory for large publicly listed companies, insurers, banks, non-bank deposit takers, and investment managers. The Financial Sec - tor (Climate-related Disclosures and Other Matters) Amendment Act 2021 required around 200 large finan - cial institutions to start making climate-related disclo - sures from 1 January 2023. Reporting is required against climate standards issued by the External Reporting Board (XRB). These climate standards are based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The standards include: • Aotearoa New Zealand Climate Standard (NZ CS) 1: Climate-Related Disclosures (NZ CS 1); • NZ CS 2: Adoption of Aotearoa New Zealand Cli - mate Standards (NZ CS 2); and • NZ CS 3: General Requirements for Climate-Relat - ed Disclosures (NZ CS 3). The Climate Reporting Entities (CREs) subject to the regime include:
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