- Physical impacts and adaptation
- NZ greenhouse gas reports
- Doing our fair share
- Emissions trading
The Emissions Trading Scheme (NZ ETS) puts obligations on certain industries to account for the greenhouse gas emissions that result from their activities. Legislation sets out which sectors are participants in the ETS – those that generate emissions and which have an obligation. Most businesses will not be part of the ETS and do not face obligations.
The NZ ETS is based around a trade in units that represent a tonne of carbon dioxide equivalent. The primary unit of trade is the New Zealand Unit (NZU), which is the unit created and distributed by the Government. Emitting firms have to surrender these to the Government annually, while those who remove rather than emit greenhouse gases – eg, those who plant and grow forests – can receive units (see Forestry – Earning NZUs).
Participants with obligations are required to acquire and surrender NZUs or other eligible units to cover each tonne of their direct greenhouse gas emissions or the emissions associated with their products. Under the scheme’s transition phase, which does not have an end date specified in the legislation, participants other than those from the forestry sector have to surrender only one NZU for every two tonnes of emissions or pay the Government a fixed price of $25 per NZU. The cost of covering emissions depends on the market prices of NZUs and other eligible emission units.
The participant is not necessarily the business at the actual point where emissions are produced. For example, in the energy and fuel sectors, participants are generally ‘upstream’ operators – transport fuel producers, coal producers, and importers bringing these products into New Zealand. Some large businesses, such as airlines and shipping companies, can choose to opt in to the NZ ETS. Forest owners are able to voluntarily enter the scheme and receive credits of NZUs for forest planted after 1989.
The sectors that currently have obligations to surrender emission units under the NZ ETS include the forestry, transport fuels, electricity production, synthetic gases, waste and industrial processes sectors. The NZ ETS participants from the industrial processes sector are large-scale businesses emitting carbon dioxide from producing iron, steel, aluminium, clinker, burnt lime, glass, and urea, or perfluorocarbons from producing aluminium.
When sectors enter the NZ ETS, participants are required to record and report the greenhouse gas emissions for which they have obligations or the removals for which they can claim NZUs, and to surrender emission units when required. How they measure emissions is set out in regulations. Sectors enter the scheme as shown in this table.
|Sector||Voluntary reporting||Mandatory reporting||Full obligations|
|Forestry||-||-||1 January 2008|
|Liquid fossil fuels||-||1 January 2010||1 July 2010|
|Electricity production||-||1 January 2010||1 July 2010|
|Industrial processes||-||1 January 2010||1 July 2010|
|Synthetic gases*||1 January 2011||1 January 2012||1 January 2013|
|Waste||1 January 2011||1 January 2012||1 January 2013|
|Agriculture||1 January 2011||1 January 2012||TBC|
*Importers and manufacturers of synthetic greenhouse gases (SGG) in bulk face an obligation to surrender NZUs from 1 January 2013. The rest of the SGG sector, which does not have an obligation to surrender units under the NZ ETS, will start facing a SGG levy from 1 July 2013
Because the Government bears the cost of New Zealand’s international obligations, when businesses buy or surrender NZUs the value of these transactions are reflected in the government’s budget. The cost of allocating NZUs to those sectors such as forestry that improve New Zealand’s overall emissions position is similarly accounted for.
Last updated: 19 April 2013