Emissions trading scheme diagram

New Zealand's Emissions Trading Scheme (ETS)

The NZ ETS is based on units, which must be obtained to cover emissions. These units can be bought and sold. Note that this diagram provides a general outline of how an emissions trading scheme operates. It does not reflect recent amendments to the scheme; specifically, that a transition phase will operate until December 2010. The transition phase will be implemented through: requiring stationary energy, industrial processes and liquid fossil fuel participants to surrender only one emission unit for every two tonnes of carbon dioxide equivilent emissions emitted; an option for SEIP, LFF and forestry participants to pay a fixed price of $25 per emission unit.
Emissions trading scheme

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This diagram illustrates how emissions trading will work using three different industries as examples.

Under the scheme an oil company will need to buy units to cover the emissions that will result when the oil they sell is used. During the year the oil company sells oil that, when used, will result in 3 units worth of emissions. The oil company needs to buy 3 units to cover the emissions that it is responsible for. It does this by buying 2 forester units and 1 unit from an industrial firm.

A forester plants some trees. During the year these trees grow, earning the forester 2 units. The forester can now sell these 2 units. In this diagram the forester sells the 2 units to the oil company.

An industrial firm is given 4 units by the government to cover some of its emissions. During the year the form installs a new plant that reduces its emissions to 2 units. Therefore it only uses 2 units and can sell the surplus 2 units. The industrial form sells a unit to the oil company and sells the other unit on the Global Emissions Markets.

Last updated: 18 June 2010