Climate Change Minister James Shaw is moving to limit the allocation of free credits under the Emissions Trading Scheme (ETS).
James Shaw Photo: RNZ / Samuel Rillstone
Shaw this morning announced plans to change the baseline rates used to calculate the allocation of free climate credits to New Zealand businesses under the scheme, which he said had not changed since the ETS was introduced 12 years ago.
Free credits were planned to be allocated to protect New Zealand companies against competition from more loosely regulated foreign firms.
But Shaw said major polluters had changed how they did business over the past decade and were now receiving many more credits than they needed.
"The government at the time said it would begin phasing down the free allocation of credits from 2013, slowly driving up the cost of pollution. However, this did not happen.
"We've been stuck with an out-of-date system that has directed large amounts of taxpayers' money towards big polluters, while keeping emissions higher than they should be. Allowing this to continue would be incompatible with the climate targets we have set."
The changes would encourage innovation from the private sector, and help the carbon market function properly, he said.
Over time, the free credits would be phased out entirely.
Shaw said the ETS was a critical tool for the government's climate action, but it could not do the job alone.
He has previously said about a third of the reductions set out in the Emissions Budget could be achieved through the scheme.