Emissions Trading Scheme (ETS)

Agriculture accounts for around half of all New Zealand's total greenhouse gas emissions.

The New Zealand Emissions Trading Scheme (ETS) is now law. On this page you will find out the main points for each sector under the ETS, what the Aussies are doing with their ETS and find out where to learn more.

The ETS is a carbon market that all New Zealanders will be affected by. The ETS will account for all Kyoto emissions and reductions within New Zealand . Those who absorb greenhouse gasses will be paid by those who emit greenhouse gasses. Each sector will be brought into the ETS in a staged manner, with forestry first and agriculture and waste last.

Try out our quick carbon calculator and see how the ETS may affect you. For more detail on the ETS see the text below or see our links page. Check out one of our farm case studies click here to see the impact of the ETS.

Main Points for Forestry and the ETS:

Started 1 January 2008

Voluntary inclusion for post 1989 " Kyoto " forests
Deforestation liabilities for pre 1990 forests if cleared after 2008
Pay back credits at point of harvest for Kyoto forests.

» More about forestry

Main Points for Agriculture and the ETS:

Starts 1 January 2015
Point of obligation initally at the processor
90% free allocation from 2015 then reducing at a rate of 1.3% dropping to 50% in 2050.

» More about agriculture

The Australian ETS (called the Carbon Pollution Reduction Scheme, [CPRS]):

Development of the CPRS or Australian ETS is currently on hold.

If you would like to know more about the (on-hold) Australian CPRS please visit our Links page.

Focus on the ETS

The aim of the Emissions Trading Scheme (ETS) is to meet New Zealand 's Kyoto commitments, at the least cost to the country.

The ETS is the first national greenhouse gas trading programme in the world which will include all gasses and all sectors.

Forestry is likely to provide surplus credits to the ETS, which will be in demand from the energy, fossil fuel, industrial processors, and agricultural sectors to offset their emissions.

All units traded in the ETS will be New Zealand Units (NZU). Each NZU will be backed by a Kyoto unit. A Kyoto unit is the internationally recognised unit for trading of emissions.

The 'all gasses' aspect of the New Zealand ETS means it covers all greenhouse gases:

carbon dioxide (CO₂ )
methane (CH₄ )
nitrous oxide (N₂O)
hydrofluorocarbons (HFC_s)
perfluorocarbons (PFC_s)
sulphur hexafluoride (SF₆ )

Each of these gases has a different Global Warming Potential (GWP), but all are referenced to the effect of Carbon Dioxide, and are termed Carbon Dioxide equivalent (CO₂e)

1 NZU = 1 Kyoto unit = 1 tonne of Carbon Dioxide equivalent (tCO₂e).

The ETS will be internationally linked; meaning those needing to buy units can purchase credits offshore if they wish, and those with surplus units can sell offshore. This linkage will mean the price of an NZU will be governed by international forces and it is suggested by ETS officials that it will provide a more stable market for the ETS.

NZU's can be transferred to Kyoto emission units (AAUs) for sales offshore. Transfers of NZU's between companies and countries will be done through the NZ Emission Unit Registry (NZEUR). The NZEUR operates like an online banking system, and is run by the Ministry of Economic Development.

Point of Obligation

Implementation of the New Zealand ETS is likely to target the source or manufacturer of the sector, except forestry. For example, solid fuels will be accounted for at the importer or refinery, fertiliser will be accounted for at the processing plant, electricity will be accounted for at the producer. The point at which the accounting is made (and so where the obligation to balance emissions/credits) is known as the 'Point of Obligation'.

Time Table

Timing for introduction into the ETS is staged for each sector; this is detailed in the table below.

Sector	Example	Inclusion Date
Forestry	Afforestation, Deforestation	1 Jan 2008
Stationary Energy	Coal, Gas, Geothermal Energy production	1 Jul 2010
Industrial Processes (non energy)	Fertiliser production Concrete production	1 Jul 2010
Liquid Fossil Fuels	Petrol, Diesel	1 Jul 2010
Waste	Landfill emissions Wastewater processing	1 Jan 2013
Agriculture/Horticulture	Ruminant emissions Urea emissions	1 Jan 2015

There are two reasons why forestry has an early inclusion into the ETS. Firstly, policy is well advanced for forestry under the Permanent Forest Sink Initiative (PFSI). The work done for the PFSI can be easily transferred to a broader forestry application. Secondly, the ETS will require a potential supply of NZUs for sectors entering at a later date that will place a demand on NZUs.

Although the agriculture sector will not enter the ETS until 2015 (after the first commitment period), the impact of others sectors being brought in earlier will increase operational costs for farmers. The costs of liquid fuels, power, fertiliser, steel and concrete will increase and be passed on to the agriculture sector as early as 2010. To minimise the impact of these cost increase, you should review the consumption (energy, materials) of your property.

In addition, implementation of emission reducing processes or systems takes time, and where it is possible to act prior to 2010, consideration should be given to early action. Many emission reduction steps will save money e.g. energy efficiency steps, and may increase productivity and profitability.

All sectors except liquid fossil fuel and stationary energy producers will receive a compensatory allocation of "free" units to assist a transition into full carbon accounting (zero allocation). Details of this allocation have not been decided, however, the Government has suggested that free allocations (for example agriculture may receive 90% of emission levels based on industry average figures) will decline from 2016 to 50% in 2050.

For more information on the Emissions Trading Scheme see our links page.