Country:New Zealand
Policy status:In Force
Date Effective:2010
Date Amended:

2010, 2012; Being reviewed 2016

Policy Type:Economic Instruments>Market-based instruments>GHG emissions trading
Policy Target:Multiple RE Sources
Policy Sector:Electricity, Framework Policy, Multi-sectoral Policy
Agency:Ministry for the Environment
Legal References:Climate Change Response (Emissions Trading) Amendment Act 2008; Climate Change Response (Moderated Emissions Trading) Amendment Act 2009; Climate Change Response (Emissions Trading and Other Matters) Amendment Act 2012

The New Zealand Emissions Trading Scheme (NZ ETS) is New Zealand’s key tool for reducing emissions and meeting our emission reduction targets. Its settings need to reflect the Government’s decisions about how New Zealand should meet its targets.

Following the 2015/16 review of the NZ ETS, the Government made in-principle decisions on four proposals to improve the operation of the NZ ETS in the 2020s. The proposals are to: introduce auctioning of units, to align the NZ ETS to our climate change targets limit participants’ use of international units when the NZ ETS reopens to international carbon markets develop a different price ceiling to eventually replace the current $25 fixed price option coordinate decisions on the supply settings in the NZ ETS over a rolling five-year period. Implementation and specific settings for the in-principle ETS decisions will be informed by the work of the Transition Hub.

Decisions about how we meet our 2030 target will need to be reflected in the NZ ETS, including the number of units auctioned in the NZ ETS and the level of the limit on international units. The review followed a two-stage process. Stage one considered the priority issues of moving to full surrender obligations and managing the costs of this. It concluded in May 2016 with a Decision to phase out the one-for-two transitional measure from the NZ ETS.

For a summary of submissions from stage one see New Zealand Emissions Trading Scheme Review 2015/16: Summary of stage one priority issues consultation responses. Stage two of the review focused on the design and operation of the NZ ETS, to assess how the settings can best support New Zealand to meet the 2030 target and subsequent targets. Stage two concluded in July 2017 with in-principle decisions on a package of four proposals to improve the operation of the NZ ETS in the 2020s. 

See Outcomes from stage two of the NZ ETS Review 2015/16. Submissions on stage two of the review reinforced that stakeholders want a clear and stable policy direction and continued engagement with the Government on the NZ ETS. For a summary of submissions from stage two of the review see New Zealand Emissions Trading Scheme Review 2015/16: Stage two submissions


In 2012 amendments were made to the NZ ETS to:

• support New Zealand contributing its fair share to international action to reduce emissions, including meeting international obligations
• deliver emission reductions in the most cost-effective manner
• support efforts to maximise the long-term economic resilience of the New Zealand economy for the least cost.
The changes maintain transition phase settings and aim to ensure the NZ ETS is flexible enough to cater for future international scenarios by giving the Government the power to auction NZ Units and introducing a number of technical amendments to improve the operation and administration of the NZ ETS. In particular, the changes:
• extend transitional measures to reduce the cost impacts of the scheme beyond 2012 – this has seen the introduction of two-for-one surrender obligations and the choice for participants to meet their obligations by paying the Government NZ$25 per tonne of emission (the fixed price option)
• remove the start date for surrender obligations for biological emissions from agriculture – the Government has indicated that the agriculture sector will only face surrender obligations if there are economically viable and practical technologies available to reduce emissions and when New Zealand’s trading partners make more progress on tackling their emissions in general
• introduce ‘offsetting’ as an option for pre-1990 forests – this provides forest land owners with the flexibility to convert their land to a better use, while avoiding deforestation costs by planting a carbon-equivalent area of forest elsewhere
• remove forest land with naturally regenerated tree weeds (ie, pest species) from post-1989 registration eligibility, unless the Environmental Protection Authority is satisfied that the risk of spread is low.

Related policies:Negotiated Greenhouse Gas Agreements (NGAs) , New Zealand Energy Strategy (NZES) , Climate Change Response Legislation , Policy Package on Climate Change
This record supersedes:National Emission Reduction Strategy

Last modified: Thu, 19 Jul 2018 19:27:31 CEST