Changes to the ETS to help us meet our climate goals

10 July 2020

The Climate Change Response (Emissions Trading Reform) Amendment Bill (Reform Bill) was passed last month.

The Emissions Trading Scheme (ETS) is New Zealand’s main policy response to climate change, and the bill introduces some changes to how the ETS works.

The amendments the government has made will improve certainty for businesses, make the ETS more accessible and improve its administration. These changes will help New Zealand reach its greenhouse gas emissions reduction targets so we can meet our long-term climate goals.

Emissions trading is a market-based approach for reducing emissions of greenhouse gases. The ETS puts a price on emissions, by charging certain sectors of the economy for the greenhouse gases they emit. On an annual basis these sectors must calculate their emissions by submitting an emissions return to us. 

They must then acquire and surrender New Zealand Units (NZUs) or other eligible emission units to account for their emissions. With the post-1989 forestry sector, returns must be submitted at least every five years.

Emission units, sometimes called 'carbon credits', are traded between participants in the Scheme The changes to the scheme include a limit on the total emissions allowed within the ETS, rules to ensure emission prices are more predictable, and a provisional emissions budget for the 2021-2025 period.

We administer the ETS, including management of the New Zealand Emissions Trading Register (the Register), which is the key tool we use to run the ETS and allow the trading of units.

We also carry out compliance, monitoring and enforcement activities under the Climate Change Response Act to ensure that participants in the scheme are complying with their obligations under the law. Like the Income Tax regime, the ETS is ‘enabling’, in that people are able to do things for themselves. People register themselves, assess their own obligations, and then do their own reporting. The reform bill will provide us with a wider range of compliance tools to help manage and maintain the integrity of the ETS and its purpose.

We will be doing targeted communications about the changes and what it will mean to those participating in the ETS over the coming months. More information will be available on this and the Register website.