Annual updates made to allocative baselines for industrial allocation 2025

Baselines are updated each year to reflect changes in electricity costs and other factors affecting the emissions costs for companies receiving industrial allocation.

Around 80 New Zealand companies have emission-intensive and trade-exposed activities and receive industrial allocation. This recognises New Zealand Emission Trading Scheme (NZ ETS) costs might affect the international competitiveness of some companies as they might not be able to increase the prices of what they produce. They receive a free allocation of New Zealand units (NZUs) to address this.

Baseline updates are part of the calculation used to determine how many NZUs each company gets each year. The Electricity Allocation Factor (EAF) is one component used for the calculation.

The EAF measures the change in electricity prices incurred as a result of emissions pricing via the ETS and is determined by the Electricity Authority.  There has been a 7% decrease from the 2024 EAF. This is due to long periods of low average wholesale electricity prices during the 2024-2025 financial year.

Firms with higher electricity use (compared with other sources of emission costs) will experience the greatest change in allocative baselines because of this technical update.

The updated allocative baselines will come into force from 1 January 2026 and will impact the final allocations made for the 2025 calendar year.