NZ ETS unit settings and annual regulatory updates 2026

Options 1 and 2 take the same approach for volumes in the second emissions budget (EB2) period – maintain status quo auction volumes of 11.7 million New Zealand Units (NZUs or units) across 2027–30. These auction volumes align strongly with EB2. They reflect a balance between continuing to strengthen New Zealand’s position to meet EB2 and managing the risk of undersupply later in the EB2 period (see Risk of undersupply). 

Both options also reflect the current state of the market, with recent auctions not clearing and the current market price sitting well below the auction price floor. This suggests that the market remains well supplied through the secondary market and supports maintaining relatively tight auction volumes.

Options 1 and 2 differ in their 2031 volumes. He Pou a Rangi | Climate Change Commission (the Commission) recommends making 3.0 million units available for auction in 2031. The Government recommends making 1.3 million units available for auction in 2031. The Government is recommending reduced auction volumes in 2031 based on a tighter provisional third emissions budget (EB3) cap (see Adjustments to provisional EB3 cap).

Option 2 is the Government’s recommended auction volumes option. It balances constraining auction volumes to support meeting domestic emissions reduction targets while maintaining the proper functioning of the ETS. It also uses the most appropriate provisional EB3 cap, based on Ministry for the Environment (the Ministry) analysis. However, final decisions have not yet been made. Consultation feedback on the overall auction volume options, and underpinning assumptions and methodological changes, will inform the final ETS settings decisions.

Option 3 reduces auction volumes across the EB2 period, compared with the status quo. This option reflects a larger stockpile drawdown, compared with the status quo, based on the Ministry’s high surplus stockpile estimate.¹³ By further reducing the stockpile, a key risk to meeting emissions budgets, option 3 strengthens the likelihood of achieving EB2 and EB3, but, by restricting auction volumes, could increase the risk of undersupply (see Risk of undersupply).

Option 3 has similar 2031 auction volumes than the Government-recommended auction volumes option.

Option 3 involves changes to the first two years of the settings period. The Climate Change Response Act 2002 (CCRA) only allows years 1 and 2 to be changed in certain circumstances. We consider that changes to the years 1 and 2 could be justified based on the recent price volatility impacting on the proper functioning of the ETS. ¹⁴ However, changing settings for the first two years does reduce the predictability of ETS settings, impacting the proper functioning of the ETS.

^{13 See appendix 1 on step 3 and step 5, for further detail on stockpile drawdown ranges.}

^{14 See CCRA section 30GB(5) and section 30GC(5)(b).}

Recent market signals suggest that the market is currently well supplied and does not require auction volumes in the short term, with the current ETS price remaining well under the auction price floor. Some commentators have questioned the need to hold auctions in this context.

At the same time, several market commentators and the Commission have noted that the ETS market may be undersupplied towards the end of the 2020s, and in general may be more short-term focused. Given this, there is a risk that, if auction volumes go unsold in 2026 and 2027, it may become unnecessarily challenging for firms to secure the NZUs needed to meet their surrender obligations. If auctions do not clear in both 2026 and 2027, the risk of undersupply may increase considerably in the late 2020s.

To address both concerns, one option would be to shift the proposed 2027 auction volumes into 2028–30 (the remaining years of EB2) when analysis suggests they are more likely to be needed. This would not affect the overall volumes, only their distribution within the settings period. Table 3 shows how this could be achieved under either option 2 or option 3.

As with option 3, this would require changing settings for the first two years of the period. The justification for changing the first two years matches that outlined in option 3. This change would also reduce predictability, but, because the change is more significant, it would have a greater impact on the proper functioning of the ETS.

Table 3: Phased auction volumes options, 2027–31 (million NZUs)

In addition to the options presented in this consultation, the Government also analysed the possibility of an option with higher auction volumes, based on a central estimate of the surplus stockpile. Under such an option, 21.6 million units could be auctioned over the settings period, an increase of 8.6 million units over the Government-recommended auction volumes. However, in our view, increasing auction volumes would not be appropriate given current market conditions, and keeping auction volumes tight would better support efforts to meet emissions budgets. The Commission considered but did not recommend a similar option based on a central estimate of the surplus stockpile.

The risk of temporary undersupply resulting in an NZU shortfall in the late 2020s has been raised by both market experts and the Commission. An NZU shortfall could drive future volatility and short-term price rises that are out of step with what is necessary to meet emissions budgets. The Commission has highlighted that this could unintentionally drive emissions reductions through plant closures and reduced production, rather than by incentivising investments in lower emissions technologies.

The risk of undersupply is a key factor in determining the most appropriate auction volume option. The extent of the risk depends largely on the size of the surplus stockpile, the liquidity of the remaining non-surplus stockpile, and the timing of forestry units entering the market, all of which are highly uncertain. The Commission has highlighted that it is currently uncertain whether and when this risk could eventuate.

The Government assesses this risk as currently manageable and that increasing auction volumes based on current signals of undersupply would be premature. It is the Ministry’s view that the non-surplus stockpile, which includes the hedge positions of firms and foresters, will continue to provide some liquidity to the market and mitigate the risk of temporary undersupply. For more details, see Implications for market dynamics and emissions budgets, and the technical annex.

The Government will continue to monitor the market for signals of undersupply, to inform 2027 ETS settings decisions.

If those signals strengthen, the Government can increase auction volumes to prevent an NZU shortfall and the associated negative impacts. However, this would likely require changing the first two years of settings and run counter to recent settings decisions. Changing direction and increasing auction volumes at short notice could negatively affect predictability and the proper functioning of the ETS. This means it is still important to set auction volumes appropriately in this year’s settings decision.

The Commission also recommended that, if there is no ETS settings update in 2027 because of a shift to biennial ETS settings decisions, the Government should consider adding a temporary lower cost containment reserve (CCR) tier to mitigate the risk of undersupply in 2028. The Government has recently announced that the planned shift to biennial ETS settings will take place after the ETS settings update in 2027. For that reason, we have not considered this recommendation this year. However, if ETS settings do move to a biennial process, and the risk of undersupply increases, this could be considered more as part of the 2027 ETS settings process.

We seek feedback on the benefits and trade-offs of the move to biennial settings in the Additional questions section.

It is important to consider recommendations on unit limits and price controls as a package. Our proposed options on unit limits do not include changes to price control settings, beyond adjustment for inflation.¹⁵

^{15 The only additional possible change would be if under option 2 or option 3 the Government chose to shift the 2027 volumes to later years (see Aligning the timing of supply to market needs). In that scenario, cost containment reserve volumes for 2027 would be set to zero.}

The role of price controls

Auction price controls provide the Government with additional tools to manage the supply of units. The settings do not set the NZU price but can influence that price by withholding units from, or adding units to, the market.

Price controls act as a safety valve to prevent the auction price from going too low (which could lower the secondary market NZU price below what is needed to meet domestic emissions reduction targets) or too high (unnecessarily impacting on the cost of living and the economy). They also signal the price pathway likely to be needed to meet future targets. Price controls apply only to government auctions and not the secondary market.

Auction price controls include:

• the auction price floor¹⁶ – the Government will not sell units at auction below this price and the confidential reserve price¹⁷
• cost containment reserve (CCR) trigger prices – additional NZUs will be released if an auction’s interim clearing price reaches or exceeds one or both of these prices 
• CCR volumes – the number of NZUs that will be released if the trigger price is reached.

The auction price floor stays at a prescribed value for each auction within the year. It prevents additional units from being sold if the market is so well supplied that businesses are not willing to pay a price aligned with domestic emissions reduction targets.

The CCR exists to manage the risk from shocks and unforeseen events that may result in extremely high prices in the ETS. It functions by releasing more NZUs into an auction where prescribed prices have been met. In 2023, the Government adopted the Commission’s recommended two-tier design for the CCR. This means there are two trigger prices – each with its own CCR.

The auction price floor and CCR trigger prices should, together, set out a price corridor that allows units to enter the market at prices that accord with New Zealand’s domestic emissions reduction targets. 

^{16 In its advice, the Commission refers to the auction price floor as the auction reserve price.}

^{17 The confidential reserve price functions to prevent the sale of units at a price materially below prevailing secondary market prices. It can be different at each auction and is not revealed to the public. This price is not set alongside other ETS settings and is not being consulted on.}

Auction price floor and CCR trigger prices

The Commission has concluded that the auction price floor and CCR trigger prices remain fit for purpose. It recommended that existing levels remain unchanged (apart from routine inflation adjustments to figures from 2029 onwards). It also recommended extending both to 2031, based on the existing 3 percent annual growth rate.

Auction price floor

The evidence in the Commission’s 2025 advice suggested that prices around or above the current auction price floor are needed to support emissions reductions necessary to meet EB2 and EB3. The Commission has highlighted that this remains relevant and has not sufficiently changed. The Commission recommends extending the price floor by one year, based on the existing 3 percent annual growth rate and adjusting for inflation.

We agree with the assessment that the current price floor remains fit for purpose. Although current secondary market prices are below the current auction price floor, this could be a signal that the market is currently oversupplied. The auction price floor helps limit supply until the oversupply is addressed. Ministry modelling suggests that pricing is likely to return to above the auction price floor within the settings period, because the auction volumes are expected to be needed alongside industrial allocation, stockpile, and forestry units to meet compliance demand.¹⁸ Maintaining the auction price floor will also support the Government’s key objectives of supporting confidence in the ETS and encouraging investment in decarbonisation.

^{18 For more detail, see Implications for market dynamics and emissions budgets.}

CCR trigger prices

The Commission reiterated its 2025 findings. Specifically, that there is a risk that trigger prices may be too low to allow for the high NZU prices needed to meet EB3 through additional gross emissions (if afforestation follows the trajectory projected in ERP2). However, additional afforestation in the next few years could help meet EB3 at a relatively lower price. The key uncertainties identified in the Commission’s 2025 advice have not been resolved, and it therefore still considers it too early to tell whether the CCR levels need to be increased. It once again advised maintaining and extending current CCR trigger prices (adjusted for inflation) until it is clearer whether current trigger prices are too low. We agree with the Commission’s findings.

The Commission also recommended that, if there is no ETS settings update in 2027 because of a shift to biennial ETS settings decisions, the Government should consider adding a temporary lower CCR tier to mitigate the risk of a shortfall in 2028. As explained above, we have not considered this recommendation but may explore it in future.

Below we outline potential adjustments to the auction price floor and CCR trigger price levels for inflation and extended to 2031. In our view, the rationale for maintaining current price controls holds for all unit limits options. 

We seek your feedback on this approach.

Cost containment volumes

The CCR volumes need to be large enough for the CCR to perform its function of bringing down the auction price when it gets too high. Where prices are so high, there is a risk that the higher cost will be passed on to consumers, potentially putting pressure on household budgets.

In its 2026 advice, the Commission recommended maintaining CCR volumes for 2027–30, plus an extension to 2031. It noted that there has been no new evidence suggesting existing CCR volumes are inappropriate, and that retaining existing volumes would support regulatory predictability and remain in accordance with EB2 and EB3.

As with last year, there is no indication that changes to CCR volumes are necessary. We consider the current volumes sufficient for the CCR to perform its role, without risking accordance with emissions budgets if the CCR is triggered. This applies for all unit limits options.

Because the existing CCR volumes were based on a surplus estimate, which is intended to be drawn down by 2030, there is no existing volume to use for 2031. For 2031, the Commission proposes a volume based on the declining trajectory of the volumes currently in regulation. We agree with the Commission’s recommendation.

Summary of price control settings

Table 4 shows the proposed price control settings for all options. 

Table 4: Proposed price control settings for the next five years, 2027–31

^{*If, under option 2 or option 3, the Government chose to shift the 2027 volumes to later years, tier 1, tier 2 and total CCR volumes for 2027 would be 0.} 

Short-term ETS market outcomes appear to be driven more by sentiment than by underlying fundamentals. Our modelling indicates increasing market tightness in the late 2020s. However, there is uncertainty as to when this will translate into auction clearance.

To model the impact of the auction volume options, our central approach is built on the explicit assumption that ETS prices remain around their current levels in 2026 before lifting to the auction floor from 2027. Alternatives, including a faster price rally or no price rally at all, are touched on below and explored in more detail in the technical annex.

As in previous years, we expect the ETS price to fall towards the price needed to incentivise exotic afforestation over the medium to long term (long-run marginal cost of forestry).

Figure 4 shows the mix of supply sources projected to meet compliance demand under option 1 and option 2 (status quo unit and price controls), and assuming our central short-run price pathway.

Option 3 (lower auction volumes) follows a broadly similar supply outlook. Compared with option 1 and option 2, the main differences are the extent of stockpile drawdown and the risk of higher prices.

These projections assume that auctions clear from 2027 to 2030, but the projected price falls below the auction price floor from 2031 in some cases. Because there will be a declining share of government supply (from industrial allocation and auctions) through the late 2020s, remaining NZU demand needs are met by the surplus, followed increasingly by low-risk forestry units.

Figure 4: Supply and demand, assuming auctions clear from 2027 onwards, option 1 and option 2

^{Source: Ministry for the Environment ETS market model.}

Our main scenarios did not provide strong evidence of a material undersupply developing under any of the considered options. However, analysis does suggest a higher risk of undersupply for option 3. The stockpile as of December 2025 was about 136 million NZUs, and our modelling indicates that, by 2030, the total stockpile remains a little under 100 million NZUs (more than three times compliance demand). The stockpile begins to increase again from this point as the high rates of afforestation in the early 2020s begin to generate NZUs in large volumes (figure 6).

The main caveat is that this analysis does not consider the potential effects of the timing of the forestry unit inflows and outflows typically observed within a mandatory emissions return period (MERP). Because forestry returns do not have to be filed until the end of the MERP period, forestry unit inflows and outflows may occur later than forecast. However, recently, a relatively high proportion of foresters have been filing voluntary returns annually. We judge that any remaining shortfall as a result of the fifth mandatory emissions return period (MERP5) timing effects could be absorbed with greater stockpile use.

Figure 5 shows the modelled price pathways for the three options. Across all options, prices are projected to recover to the auction price floor within the next one to two years and peak around 2030, before steadily declining towards the long-run marginal cost of forestry. In general terms, the longer prices are low in the near term (implying auctions do not clear), the higher they rise towards 2030 to offset the lost earlier auction supply. Reduced auction supply under option 3 is expected to put greater upward pressure on prices, all else equal, by tightening overall market supply, compared with option 1 and option 2. Sensitivity testing also pointed to higher prices under option 3. If the stockpile is more liquid than anticipated, this could alleviate some of the upward price pressure across all options, leaving the auction price floor as the main anchor.

Appendix 3 has more details on possible price pathways.

Figure 5: Projected price paths for options 1 to 3

^{Source: Ministry for the Environment ETS market model.}

Figure 6: Projected NZU stockpile under options 1 to 3 and ‘no auction’ scenario

^{Source: Ministry for the Environment ETS market model.}

We also ran a ‘no auction’ scenario where prices remain around their current levels and, therefore, no auctions clear. Figure 6 shows that a relatively modest increase in stockpile drawdown would be needed to meet demand, holding other sources of supply unchanged. In this scenario, the total stockpile remains at more than 2.5 times annual demand in 2030. A possible takeaway is that prices already reflect long-term market fundamentals and could continue to remain at current levels if the overall stockpile remains sufficiently liquid.

Implications for total net emissions

The market model was not designed to estimate total net emissions – its focus is on net emissions covered by the ETS. However, we can combine the model outputs with other information to make high-level projections of total net emissions. Hence, emission estimates are communicated within ranges constructed from sensitivity analysis based on the price responsiveness ranges.¹⁹

Within these limitations, the analysis indicates all modelled auction volume options are likely to keep total net emissions (central projection) within the EB2 target range (figure 7). Conversely, it is highly probable that the total EB3 net emissions from all three options are above the EB3 threshold.

Figure 7: Projected net emissions in EB2 and EB3 under options 1 to 3

^{Source: Ministry for the Environment ETS market model.}

The EB3 emissions outcome reflects a continued stockpile drawdown in response to flat or falling future price expectations, offsetting the tightening auction unit supply over EB3. Even with this effect, as shown in figure 6, the total stockpile is expected to continue to increase post-2030 as forestry units steadily accrue. In these circumstances, it is difficult to construct a case that prices will remain sufficiently high for long enough to drive net emissions within the EB3 target using the ETS alone. The Accordance with EB3 section outlines how the Government will identify strategic options across major emitting sectors alongside the ETS, to support and encourage emissions reduction and removals.

^{19 We also modelled total net emissions in the broad-based Emissions in New Zealand (ENZ) model used by the Government and Commission for climate mitigation policy analysis and projections. The results were broadly similar to those produced by the market model. See the technical annex for more information.}

Given the current economic environment and the increased strain on households from the Middle East conflict, it is particularly important to understand the impacts of ETS settings decisions on the economy and households.

The ETS works by placing a cost on emissions to businesses with obligations under the ETS. It incentivises greater reduction of gross emissions as businesses consider low-emissions alternatives that avoid that cost. The ETS affects various sectors of the New Zealand economy differently. It adds higher costs to activities that are more emissions intensive, while it provides an additional revenue stream for foresters who can earn NZUs.

Businesses may choose to offset this cost where they can, by investing in lower emissions technologies or processes, by increasing their prices to consumers or by reducing their costs. Reducing their costs could include reducing the number of employees. Higher prices passed on to consumers contribute to inflation and increase the cost of household essentials, such as fuel, electricity and food (largely through fuel costs embedded in production and transport). Households can switch to lower emissions alternatives to offset some of these costs.

Changes in ETS prices make relatively small contributions to consumer inflation, compared with other macroeconomic drivers. We estimate that a $10 increase would increase annual consumer price inflation by 0.12 percentage points, assuming businesses pass on the costs in full and swiftly to consumers.

We estimate that a $10 increase in the ETS price adds about $98 per year to the average household’s expenditure, mostly through its impacts on fuel and electricity prices. For lowest-income households, a $10 increase adds about $50 to $60 per year; for highest-income households, $140 to $170 per year.

The price of NZUs is projected to increase over time across all options presented. Option 3 is expected to have larger price increases than option 1 and option 2 and correspondingly larger impacts on businesses and households. The impacts on consumer inflation are expected to be modest under all unit volume options, adding about 0.1 percent per year to inflation.

For further detail, see appendix 3.

Impact on Māori

Māori, iwi and hapū are affected by the ETS in various ways. These groups have different interests and roles in the ETS. In addition, the Crown has a relationship with iwi and hapū as Treaty partners, including, for example, through post-settlement governance entities. NZU price and unit settings are likely to affect the following Māori interests.

• Income from plantation forestry on Māori land in the ETS – variable land ownership models (eg, iwi subsidiaries, Māori land incorporations and ahu whenua Māori land trusts) mean impacts on income are often shared across trustees and communities over generations, and can be either marginal or significant depending on the ownership model, history and geography of the land.
• Costs for land-use change away from exotic forestry – The ETS can be a cost barrier when shifting from exotic plantation (particularly pre-1990 forest) to other land uses (eg, natives or pastoral land uses). As Treaty of Waitangi settlements near completion, around 40 percent of New Zealand’s 1.8 million hectares of plantation forestry are estimated to be on Māori land. Most of this forest is pre-1990 forest land. ETS settings can influence these incentives by affecting the ETS price.
• Incentives for land-use change to forestry – Forestry in the ETS can provide an important land-use option on Māori land. The scheme can provide a source of revenue on remote or marginal land where other land uses are uneconomic (eg, permanent forestry). ETS settings can influence these incentives by affecting the ETS price.
• Business profits and jobs tied to NZUs – Māori own over $6 billion in forestry assets (2023²⁰) and around one-third of the forestry workforce is Māori.²¹ 
• Business profits and jobs in emitting sectors – Māori are over-represented in emissions-intensive industries (mainly food processing and forestry) and significantly under-represented in low-emissions sectors.²²  
• Household living costs – ETS price changes flow through to consumer prices; lower income households are more affected, and Māori are over-represented in these groups.
• Impacts may be geographically uneven – The impacts of ETS price changes may be concentrated in areas where Māori land ownership and employment in emissions-intensive sectors are higher.

^{20 Hillmare S, Reid A, Dixon H, McIndoe C, Wiradika S. 2024. Te Ōhanga: The Māori Economy 2023 (PDF 13.2MB). Wellington: BERL.}

^{21 Te Mata Raraunga. GDP and Occupation Forecasting – Workforce Skills Shared Data Platform. Retrieved 2 May 2026.}

^{22 McMillan A, Riley H, Dixon H. 2021. Māori economy emissions profile: Climate change mitigation impact on the Māori economy (PDF 4.7MB). Wellington: Prepared for Ministry for Primary Industries by BERL.}

Importance of stability and predictability

Feedback from ETS settings consultation in 2025 highlighted the need to better consider the impact of the rate of price change on firms and households and the impact of options on market confidence, including flow-on impacts.

The importance of market confidence to support long-term, intergenerational decisions was also a key theme in the Commission’s recent engagement with Māori stakeholders on ETS settings.

Price changes come with trade-offs across groups – for example, higher ETS prices can increase forestry returns while raising household costs. However, price volatility has negative impacts across all groups. Avoiding rapid price changes supports both household affordability and investment confidence, enabling decarbonisation and economic opportunities through the ETS. This is particularly important for Māori land owners who hold a higher proportion of marginal land (eg, remote or landlocked) with fewer alternative economic uses.

The Government views the Government-recommended auction volumes (option 2) as best supporting the goal of a stable and credible ETS market while ensuring New Zealand is well positioned to meet its emissions budgets and targets. Amending the first two years of ETS settings may have negative impacts on stability and predictability because the market generally expects those years to be fixed. This is the case for option 3 and phasing options where 2027 auction volumes are shifted to later years.

Flow through of market confidence to the economy and households

The ETS market has recently shown a short-term focus and high sensitivity to government signals, including ETS settings. This means ETS settings, even with minimal changes, can have an impact on price, flowing through to the economy and households, due to the impact of settings on market sentiment.

Low market confidence risks reducing investment in decarbonisation and carbon removals, and can negatively affect land owners and those reliant on land-based income. For some Māori land owners, particularly larger iwi subsidiaries, this also affects wider communities that benefit from collectively held land. All else equal, we expect option 1 and option 2 to improve market confidence by supporting stability and providing greater predictability during broader economic uncertainty (eg, the Middle East conflict).

Option 3 may signal increased government ambition on emissions reductions, which could lift market confidence. However, this effect may be offset if lower volumes are seen as inconsistent with the Government’s stated commitment to market stability in ERP2. In addition, novel approaches, such as shifting 2027 auction volumes to later years, could reduce market confidence because the market may perceive an increased likelihood of government intervention.

For more detail on expected impacts on different groups, see appendix 3.

We acknowledge the possibility of gaps in our analysis, including on impacts specific to Māori. 

As part of this consultation, we are interested in your views on our impact assessment, including views from different Māori groups. 

Accordance with domestic emissions reduction targets

Later this year, we will make a full accordance assessment to support final ETS settings decisions. However, our preliminary assessment and modelling suggest that all options included for consultation will meet the accordance requirements under the CCRA when assessed.

Accordance with EB2

Ministry for the Environment modelling (see Implications for market dynamics and emissions budgets) shows all the options have a very high probability of achieving EB2 across the scenarios tested. Therefore, they are likely to meet the CCRA requirements.

Accordance with EB3

Current modelling shows that all options are likely to exceed EB3. All the options set unit limits to reduce the estimated surplus stockpile to zero before the start of the EB3 period (2031). They also keep price controls high to ensure volumes do not enter the market at a price below what is needed to achieve EB3. The Government will also explore additional policies to support meeting EB3, as explained below.

For those reasons, our current assessment is that all options are likely to accord, but not strictly accord, when formally assessed.

If an option accords, but does not strictly accord, the Minister of Climate Change must be confident that this deviation is justified after considering matters prescribed in the CCRA. The major reason justifying deviation is that adopting 2026 ETS settings that strictly accord with EB3 could run counter to the proper functioning of the ETS. It could require significant reductions in unit volumes between 2027 and 2031 that could impede participants’ ability to obtain units to meet their compliance obligations, and is likely to lead to highly volatile prices.²³

^{23 This relates to section 30GC(5)(b) of the CCRA, the proper functioning of the emissions trading scheme.}

Exploring additional policies to support meeting EB3

Alongside determining the appropriate ETS settings options for consultation, the Government recognises that, although the ETS remains a major tool for meeting emissions budgets, it is not expected to meet EB3 on its own. Additional options to support and encourage emissions reduction and removals across major emitting sectors will be needed, alongside the ETS, to achieve EB3. The Government has agreed to explore these options in advance of the third emissions reduction plan development, and will consider advice on this next year.

Accordance with 2050 target

All the options for consultation are in line with what is needed to meet EB2, and position New Zealand well to meet EB3, with the support of strategic options across major emitting sectors. These emissions budgets act as interim targets towards the 2050 target.

The 2050 target also includes 2030 and 2050 biogenic methane targets.

The ETS covers only a very small proportion of biogenic methane emissions. In addition, the ETS provides a price incentive that is neutral to how and where emissions reductions are achieved. By design, the ETS cannot target reductions in a particular sector or to a particular greenhouse gas. Together, these features mean the role of the ETS in meeting the biogenic methane targets is relatively limited. We therefore do not consider that progress towards these biogenic methane targets impacts the accordance of proposed ETS settings with the 2050 target.

For these reasons, all options are likely to strictly accord with the 2050 target.

Overall assessment

Table 4 compares the three options against the assessment criteria. This is a preliminary assessment. Further analysis and consultation feedback on the changes will enable a more accurate assessment at the time of final settings decisions.

Table 5: Assessment of options

^{* These assessment criteria only apply to price controls. Because price controls are identical for all options, all are evaluated as the same.}

Key    

• ++     Much better than the status quo
• +     Better than the status quo
• –     Worse than the status quo
• – –     Much worse than the status quo
• 0    About the same as the status quo.