Emissions Trading Scheme

New Zealand's Emissions Trading Scheme (ETS) is part of our response to climate change. The ETS puts a price on greenhouse gases to encourage environmentally sustainable behaviour.

 

How the ETS works

The ETS puts a price on greenhouse gas emissions. People or organisations involved in the Emissions Trading Scheme (generally land owners, businesses, or people with forestry rights) can earn credits for business activities that absorb carbon dioxide (like planting or managing forests). When they earn credits, they can either:

  • trade them
  • hold onto them
  • surrender them back to offset their activities that emit greenhouse gases (like burning fossil fuels) or reduce stored carbon (like harvesting trees).

Emitters can also purchase credits to offset their emissions. This provides an incentive for people to reduce emissions and plant forests to absorb carbon dioxide.

Environmental accounting

Certain businesses are required to acquire and surrender emission units to account for their direct greenhouse gas emissions or the emissions associated with their products.

An emission unit represents one metric tonne of carbon dioxide or the equivalent of any other greenhouse gas (carbon dioxide equivalent). There are lots of unit types and a variety of emission units are traded throughout the world.

The ETS and MPI

MPI's main role is to administer the ETS for the forestry sector. We do this in partnership with the Ministry for the Environment (MfE) and the Environmental Protection Authority. We also work with MfE on climate change policy for the agriculture and forestry sectors.

Agriculture and the ETS

Farmers and producers are not currently required to surrender emission units for the biological emissions produced by agricultural activities. The Government has commissioned the Interim Climate Change Committee to assess how surrender obligations could best be arranged if agricultural methane and nitrous oxide emissions enter into the New Zealand Emissions Trading Scheme.

Agricultural processors must report the on-farm biological emissions associated with the production of the milk and meat they process to the Environmental Protection Authority.

The term "agricultural processors" includes:

  • meat processors
  • dairy processors
  • nitrogen fertiliser manufacturers and importers
  • live animal exporters.

There are some exemptions to these categories, including:

  • wool and velvet processors
  • egg producers.

Purpose of the Emissions Trading Scheme

It's about sustainability and achieving our commitment to reducing emissions

The primary aim of the ETS is to encourage environmentally sustainable behaviour.

In New Zealand, sustainability is defined as:

  • good governance that supports and maintains profitable enterprises
  • encouraging and protecting the environmental integrity of both our ecosystems and the social wellbeing of our communities.

2016 - The Paris Agreement

The Government ratified the Paris Agreement in October 2016. The Agreement commits New Zealand to an ambitious target – to reduce emissions to 30% below 2005 levels by 2030. To meet our commitments under the Agreement, changes would need to be made to the ETS and our other climate change policies and programmes.

Reviews of the ETS

Between 2015 and 2019, the Government has been consulting with New Zealanders on potential changes and improvements to the ETS. We've got information on the reviews and outcomes.

Find out more

Who to contact

If you have questions about MPI's role in the ETS or what you can do to reduce your emissions by planting forests, email climate.change@mpi.govt.nz

Last reviewed: