Template-Type: ReDIF-Paper 1.0
Author-Name: Catherine Leining
Author-X-Name-First: Catherine
Author-X-Name-Last: Leining
Author-Email: catherine.leining@motu.org.nz
Author-Workplace-Name: Motu Economic and Public Policy Research
Author-Name: Suzi Kerr
Author-X-Name-First: Suzi
Author-X-Name-Last: Kerr
Author-Email: suzi.kerr@motu.org.nz
Author-Workplace-Name: Motu Economic and Public Policy Research
Title: Lessons Learned from the New Zealand Emissions Trading Scheme
Abstract: The New Zealand Emissions Trading Scheme (NZ ETS) is the New Zealand government’s cornerstone policy instrument for meeting New Zealand’s climate change responsibilities. The New Zealand system was designed based on strong linkages to international carbon markets. Understanding how these have affected the New Zealand market is critical both for policymakers in New Zealand and designers of international emissions trading schemes who are considering linkages. We adapt Pizer and Yates' 2013 model of a linked tradable permit systems to conditions in the NZ ETS. We compare the model with price and surrender data and find that the international linkage works as expected. When New Zealand is a buyer of units and linking is certain, NZU prices are roughly equal to the Kyoto unit price. When the New Zealand government announces that New Zealand will de-link – no longer allowing any international units – prices diverge and New Zealand participants meet almost all current obligations with Kyoto units, saving their NZUs for the delinked future.
Length: 47 pages
Creation-Date: 2016-04
File-URL: https://motu-www.motu.org.nz/wpapers/16_06.pdf
Number: 16_06
Classification-JEL: Q54, Q58
Keywords: New Zealand Emissions Trading Scheme (NZ ETS), Emissions trading, linked tradable permit market, Kyoto units, Certified Emission Reductions (CERs), Emission Reduction Units (ERUs), greenhouse gas, carbon markets. 
Handle: RePEc:mtu:wpaper:16_06