About the New Zealand Emissions Trading Scheme
The New Zealand Emissions Trading Scheme (NZ ETS) is a key tool for meeting our domestic and international climate change targets, including the 2050 target set by the Climate Change Response Act 2002.
The NZ ETS is a key tool in the governments climate change response toolbox.
The purpose of the NZ ETS is to:
- assist New Zealand to meet its international obligations under the Paris Agreement
- help New Zealand to meet its 2050 target and emissions budgets.
The Climate Change Response Act 2002 [New Zealand Legislation Website] sets the purpose of the NZ ETS.
The New Zealand Emissions Trading Scheme helps reduce emissions by doing three main things:
- requiring businesses to measure and report on their greenhouse gas emissions
- requiring businesses to surrender one ‘emissions unit’ (known as an NZU) to the Government for each one tonne of emissions they emit
- limiting the number of NZUs available to emitters (i.e. that are supplied into the scheme).
The Government sets and reduces the number of units supplied into the scheme over time. This limits the quantity that emitters can emit, in line with New Zealand’s emission reduction targets.
Businesses who participate in the NZ ETS can buy and sell units from each other. The price for units reflects supply and demand in the scheme. This price signal allows businesses to make economically efficient choices about how to reduce emissions.
This video provides a short explanation of how the New Zealand Emissions Trading Scheme works.
All sectors of New Zealand's economy, apart from agriculture, pay for their emissions through their NZ ETS surrender obligations.
The NZ ETS is one of many emissions trading schemes in operation around the world. At the moment, New Zealand isn’t linked with any other schemes.
These schemes operate at a range of levels including Supra-national (1), Country (8), State & Province (19) and City level (6).
- In 2020, all ETS's in operation covered around 17% of global greenhouse gas emissions.
- Jurisdictions making up 55% of global GDP are using emissions trading
- Almost 1/3 of the global population lives under an operational ETS.
Image: ICAP. (2022). Emissions Trading Worldwide: Status Report 2022. Berlin: International Carbon Action Partnership.
Image: ICAP. (2022). Emissions Trading Worldwide: Status Report 2022. Berlin: International Carbon Action Partnership.
On 4 November 2025, the Government announced it intends to remove the provision in the Climate Change Response Act that requires unit volumes and price control settings for the NZ Emissions Trading Scheme (NZ ETS) to “accord” with New Zealand’s Nationally Determined Contributions (NDCs).
New Zealand’s Nationally Determined Contributions under the Paris Agreement remain unchanged.
The Ministry for the Environment is providing some additional points of fact around the statutory requirements for the NZ ETS as well as relevant unit volumes:
- There is no change to the requirement that NZ ETS Settings decisions must “accord” with our domestic emissions budgets and 2050 target. This requirement has underpinned NZ ETS Settings decisions made to date and will continue.
- The Climate Change Response Act does not prevent the Government from taking decisions that achieve more emissions reductions than what is necessary to meet the requirements of the Act.
As part of this year’s decisions the Government chose to make approximately 14 million units fewer available for auction than the Climate Change Commission had recommended, in order to, amongst other reasons, increase the likelihood of achieving of achieving New Zealand’s emissions budgets. - Under current policy settings, the Government will auction approximately 17 million units over the period 2026-2030, out of a total NZ ETS cap of approximately 89 million units in the same period.
See Annual updates to emission unit limits and price control settings
See Government announces a series of changes to NZ's climate change law