The High Court has been asked to overturn a Cabinet decision to artificially deflate the price of carbon because it went against the advice of the Climate Change Commission.

The climate-concerned lawyers behind a previous major legal action against the Government and the commission filed a new statement of claim on Tuesday, this time targeting Climate Change Minister James Shaw. Lawyers for Climate Action (LCANZI) says Cabinet’s decision to reject the advice of the commission on price controls in the Emissions Trading Scheme (ETS) violated the Zero Carbon Act’s requirements.

While Shaw recommended following the commission’s settings in full, Cabinet overrode him in a late November meeting due to concerns about the impact of a rising carbon price on the cost of living. As the climate minister, it was ultimately Shaw’s responsibility to carry out Cabinet’s decision.

“I am aware of the claim filed by Lawyers For Climate Action. As the matter is before the courts, I can’t comment further,  but it is important that citizens have the right to be heard,” Shaw told Newsroom on Tuesday evening.

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Under the climate legislation, ETS price controls must be set in a manner consistent with meeting our emissions budgets and other climate targets. There is allowance for deviation in some circumstances, but a comprehensive explanation of the reasons for the discrepancy needs to be supplied in a report to Parliament.

Newsroom reported in March that the commission had written to Shaw to express its disappointment with the report he had filed.

“In the commission’s view the level of detail that should be delivered in response to departing from the commission’s advice was not in the report. The report should have provided a reason for each of the key points where the Government chose to depart from the commission’s advice,” commission chair Rod Carr wrote.

LCANZI cited this letter, as well as the commission’s more recent advice on ETS settings for future years, in its filing.

In the end, the settings “were based on an error of law because the advice given to Cabinet and the minister, and implicitly the Cabinet decision and the minister’s decision, wrongly assumed that the settings need not be in accordance with the Emissions Budgets, the [nationally determined contribution] or the 2050 target and that accordance with these matters could be traded off against other considerations such as the cost of living”.

Bronwyn Carruthers KC, President of LCANZI, said the move takes New Zealand in the wrong direction.

“There is scientific consensus that limiting warming to 1.5C is essential to avoid the worst impacts of climate change. It is also the agreed global goal under the Paris Agreement, and the purpose of the Climate Change Response Act. Every lever we have should be being exercised to its greatest extent to try to mitigate this coming humanitarian and ecological disaster. The use of these regulations to water down one of the few tools we have to lower Aoteaora New Zealand’s emissions is unacceptable and unlawful.”

Since Cabinet’s decision in December, the carbon price has cratered from $86 to $54. It is now below the minimum price pathway consistent with meeting emissions budgets, according to figures from the Climate Commission.

Government financial statements released on Tuesday also show the price decline has hit the Crown accounts. The fiscal impact is a cost of around $800 million, because the Government will receive less auction revenue than previously anticipated.

At the first auction of units after the Cabinet decision was announced, in March, the clearing price fell below the auction reserve and no units were sold. Finance Minister Grant Robertson said officials weren’t worried about the impact of the failed auction, but Shaw was less confident.

“It’s a little too early to tell because, although no units were sold today, the total number of units that are up for auction remains the same. Those units that didn’t clear today will simply get held over for future auctions,” he said. “Across the year, the answer is I don’t know what impact it’s going to have on future revenues because it depends on what happens in future auctions.”

In its advice last month on future ETS settings, the commission scolded the Government for ignoring its advice.

“Weakening decisions on NZ ETS settings and climate policy in general during times of adverse economic conditions, which climate change is only likely to exacerbate, is not sustainable in the long run and will greatly compromise our chance of meeting the climate change targets set out in the act,” Carr wrote.

At the time, climate policy expert Christina Hood said the harsh language in the report was the most critical the commission had been of a government decision.

“This is much clearer and stronger than anything we’ve seen the commission come out with before. It’s a real shot across the bows,” she said.

“They obviously think that the Government has made a mistake and are not pulling any punches in saying so.”

When asked whether he felt told off by the commission, Shaw pointed out he had backed it in Cabinet discussions. Should his ministerial colleagues feel scolded, then?

“You’d have to talk to them about that,” he said.

Marc Daalder is a senior political reporter based in Wellington who covers climate change, health, energy and violent extremism. Twitter/Bluesky: @marcdaalder

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