Coverage of the New Zealand Emissions Trading Scheme

The NZ ETS covers all sectors of New Zealand's economy. Different sectors participate in the NZ ETS in different ways.

All sectors covered by the NZ ETS must report their annual greenhouse gas emissions to the government. The sectors are:

• forestry
• agriculture
• waste
• synthetic gases
• industrial processes (such as manufacturers of iron and steel)
• liquid fossil fuels (such as petrol and diesel suppliers)
• stationary energy (such as electricity generation and industrial heating).

Just over 50 per cent of New Zealand’s greenhouse gas emissions are covered by surrender obligations.

Surrender obligations mean that a business participating in the NZ ETS is required to buy and surrender to the Government, one NZU for every one tonne of carbon dioxide equivalent (CO­₂-e) emissions they produce.

All sectors apart from agriculture have surrender obligations as well as reporting obligations. The agriculture sector was responsible for around 48 per cent of emissions in 2017. The Government is working with the agriculture sector to develop a pricing mechanism, through He Waka Eke Noa.

The NZ ETS covers six greenhouse gases that contribute to global warming. These are:

• carbon dioxide (CO₂)
• methane (CH₄)
• nitrous oxide (N₂O)
• sulfur hexafluoride (SF₆)
• hydrofluorocarbons (HFC's)
• perfluorocarbons (PFCs).

All gases are treated and accounted for the same in the NZ ETS, using the carbon dioxide equivalent (CO₂-e) standard unit.

• carbon dioxide equivalent, in relation to a greenhouse gas, means the amount of carbon dioxide (in tonnes) that would produce the same global warming as the amount of that gas, calculated in accordance with international climate change obligations.

Emissions reductions targets

The emissions reductions targets provide the NZ ETS with a purpose and direction. The targets also set the overall ambition level for emissions reductions to help Aotearoa transition to a low carbon economy.

In the NZ ETS the point of obligation - where emissions are reported and priced - is generally set far up the supply chain as possible. This limits administrative costs as it means that most businesses in New Zealand do not have NZ ETS obligations.

For example, the obligation for liquid fossil fuels (such as petrol, diesel and aviation fuel) is placed on the companies importing the fuel, rather than on the drivers of fossil-fueled vehicles. This makes it possible to put a price on emissions from the transport sector without directly involving the millions of people who own cars.