New Zealand Emissions Trading Scheme

The New Zealand Emissions Trading Scheme (NZ ETS) is the main policy tool of the New Zealand Government to reduce greenhouse gas emissions to help the country meet its targets under first the Kyoto Protocol and now more recently under the Paris Accord. New Zealand  kicked off in 2008 and when it was launched it was the first emissions trading scheme in the world to include forestry. The scheme has been going for over 10 years now and it remains a central tool of the New Zealand Government for meeting its greenhouse gas emission reduction targets.

The NZ ETS covers forestry (a net sink), energy (42% of total 2012 emissions), industry (7% of total 2012 emissions) and waste (5% of total 2012 emissions) but not pastoral agriculture (46% of 2012 total emissions). The NZ ETS covered all six greenhouse gases specified in the Kyoto Protocol and was intended to progressively apply to all sectors of the economy including agriculture. When the scheme first kicked off in 2008, there was a plan to introduce agriculture by 2015 but under the National Government, in 2009 a review of the NZ ETS was conducted and it was decided not to include agriculture after all.

Under the Paris Accord, New Zealand has committed to a 30% reduction of greenhouse gas levels below 2005 by 2030. Mainly because opportunities to reduce greenhouse gases in other sectors are limited (especially agriculture) in order to meet this target, New Zealand will need to plant a lot of trees and also we believe embrace international carbon trading once again during the period 2020-2030.

The NZ ETS has created a specific domestic emission unit for use in New Zealand, the New Zealand Unit (NZU). The NZUs are not a Kyotounit in terms of compliance with the Kyoto Protocol, and can only be surrendered or traded within New Zealand. Assigned amount units (AAUs) issued by New Zealand under the Kyoto Protocol can be also used by emitters to meet their surrender obligations. In addition, during the period 2008 -2015 New Zealand Units could be converted into AAUs and sold internationally. The first AAU transaction was carried out by Carbon Market Solutions in 2009 and involved the sale of 500,000 NZUs (converted into AAUs) from a New Zealand forestry company to Norway. The NZUs in the New Zealand registry were converted into AAUs and then transferred offshore via the international transaction log (ITL). During the period 2008 – 2015 Participants in the NZ ETS are were able to purchase and surrender international Kyoto units such as  (ERUs), Certified Emission Reductions (CERs) and Removal Units (RMUs) issued in other countries. However, since 2015 this has not been possible and the New Zealand Emissions Register is currently not open to transfer units to and from other countries. This situation may change at some point in the future.

If you are interested in more information about international carbon trading or some of the spectacular carbon transactions that CMS pulled off from New Zealand into the international carbon market then please contact us at info@carbonmarketsolutions.com