Marc Daalder is a senior political reporter based in Wellington who covers Covid-19, climate change, energy, primary industries, technology and the far-right.
The decision, detailed in Cabinet documents released on the Ministry for the Environment website on Thursday, was approved by Cabinet in December.
Climate Change Minister James Shaw acknowledged in a Cabinet paper that the change “will likely be controversial and have considerable fiscal implications within the NZ ETS”.
Like other big industrials which export their products, the smelter is entitled to a free allocation of NZUs to level the playing field when competing with overseas companies that don’t face a carbon price.
The bulk of the smelter’s allocation comes as a result of the indirect pressure of the carbon price.
“The evidence suggests there is no indirect cost from the NZ ETS on the electricity price agreed in the main contract,” officials wrote in a regulatory impact statement.
Officials reported that NZAS believed the Government had promised not to change allocations in a December 2020 letter from Finance Minister Grant Robertson.
“The modeller has demonstrated in previous analysis a consistent view that EAFs should be based on long run considerations and should therefore be lower than it is,” NZAS argued in its submission.
If you can help us, please click the button to ensure we can continue to provide quality independent journalism you can trust.