Electricity Allocation Factor Update

The Electricity Allocation Factor (EAF)

The EAF is part of the New Zealand Government's industrial allocation policy, which protects the competitiveness of emissions intensive trade exposed (EITE) firms that face increases in costs as a result of the New Zealand Emissions Trading Scheme (NZ ETS). The EAF represents costs associated with the NZ ETS that are expected to flow to eligible firms through electricity prices. The EAF is expressed in emission terms as the assigned allocation is received in emission units. 

The EAF of 0.52 tCO2-e/MWh is a component of the allocative baseline that is used to calculate the allocation received by  eligible industries. Therefore, if there are changes to the EAF the allocations received by firms might also change.

Why is the EAF being reconsidered?

The factor needs to be reconsidered to ensure the electricity allocation factor remains current and reflects any electricity system changes, such as changes in the ratio of renewable and non-renewable electricity generation. This follows a similar process that was established during the development of the current EAF.

For more information, check out the development of the EAF.

Emission factors for other energy sources

Emission factors for other energy sources, such as coal and gas, are included in the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009 (SEIP Regulations) as they are used by firms with ETS obligations to reflect emissions, as well as for allocation purposes. They are revised as necessary when the SEIP Regulations are updated.  The value of these types of emission factors is generally less likely to change over time.

The EAF Contact Group

The EAF contact group consists of representatives from significantly affected parties that are familiar with electricity market issues and the NZ ETS.  This includes people from government agencies, emission intensive and trade exposed firms, power companies and specialist consultants.

Consultation - Having your say

If a new EAF for 2013-2017 is proposed, then consultation will occur around the regulation change and interested parties will be notified at that time. 

Last updated: 4 December 2012