Introduction to ETS

Introduction to ETS

Emissions Trading Scheme in a snapshot
Under the overall scheme of the Emissions Trading Scheme ('ETS'), industrial sectors are limited in their greenhouse gas emissions (carbon dioxide, methane and nitrous oxide) to the amount of gases backed by Emissions Trading Scheme units (NZUs) they hold. Businesses are allocated units annually by the Government in accordance with what the Government has decided is their sector's appropriate contribution towards New Zealand's overall emissions. The allocation decreases over time to encourage businesses to carry out their operations in a manner that emits fewer greenhouse gases. The business surrenders units in accordance with the emissions it calculates it has made (which it must report).  If the business wishes to emit in excess of its allocation, it needs to buy more units from another participant in the scheme who has more units that it is obliged to surrender. Alternatively the business could earn NZUs by planting trees which sequester carbon.

Agriculture and the ETS
Participants in the ETS for agriculture will have to report activities and, in time, surrender New Zealand Units (NZUs) to account for agricultural emissions (methane from livestock, nitrous oxide from excrement and the use of nitrogen in fertiliser). They will receive allocations of NZUs to help offset the cost of this.

Like all New Zealanders, farmers are also  likely to notice a small increase in energy prices due to the ETS. For more information on these effects and how to reduce your energy costs, please see What does the ETS mean for me?

With some exceptions, participants for agriculture are meat and dairy processors, exporters of live animals, fertiliser importers and manufacturers, and egg producers.

Farmers do not need to register and directly participate in the ETS

Allocations of NZUs
The allocation will be provided on an output intensity basis. This means that a participant’s allocation will vary with output.

The assistance level will be 90 per cent of the emissions baseline and will phase out at −1.3 per cent per annum from when surrender obligations commence for agriculture. The baseline will be the industry average emissions per unit of output for a given year or years.

The baseline will be established by regulation and subject to a consultation process.

Further Information

For a leaflet providing further information about how the ETS works for farmers, click here.