Report on the New Zealand Emissions Trading Scheme
New Zealand’s emissions trading scheme (ETS) was introduced by the Government as the lowest cost way to reduce this country’s greenhouse gas emissions. This is the first annual report on the scheme.
Forestry was the first sector of the New Zealand economy to join the ETS, on 1 January 2008. From 1 July 2010, three new sectors – energy, industry and transport – faced an obligation to surrender units according to the level of their emissions. Their entry established a tradable market for carbon in New Zealand.
The three new sectors brought 38 business activities into the ETS. Most New Zealand businesses will not participate directly in the scheme, because it is designed to transfer the cost of emissions to those highest in the supply chain – the point of obligation.
A transition phase for the new entrants is in place until the end of 2012. During this phase, participants are only required to surrender one unit for every two tonnes of carbon dioxide equivalent emitted. During the transition, participants may also choose to pay the Government a fixed price of NZ$25 per tonne of emissions, rather than surrender emission units.
The Government has made some one-off allocations to compensate businesses for the loss of property value. These apply to fisheries quota holders and to owners of pre-1990 forest lands. Annual allocations are also made to some businesses in the industrial sector that would otherwise face unfair competition from imported goods that did not have to absorb higher-energy prices. Initial estimates were that 80–100 businesses would receive allocations; this has risen to nearly 300 eligible businesses.
Among businesses participating in the ETS, a high proportion has met their reporting and surrender obligations.
Early signs are that a price on carbon has successfully entered the New Zealand economy; businesses and foresters are factoring in this price into their long-term decisions, and passing the price of carbon down to consumers.
Last updated: 2 September 2011
