Annual updates to emission unit limits and price control settings

The Minister of Climate Change is required to update the overall limit, sub-limits, and price control settings every year. This ensures there is always five-years of settings in place (see Figure 1 below).

The five-year process means: 

• announcing new unit limit volumes and price control settings for the fifth year 
• considering whether new limits and price control settings should be recommended for years 3 and 4 
• potentially prescribing new limits and price control settings for years 1 and 2, if the amendment is justified by special circumstances that require change. 

The special circumstances which could justify a change include: 

• a change that has significantly affected any matter that the Minister is required to consider under section 30GC of the Climate Change Response Act 2002 (New Zealand Legislation). For example, projected trends, proper functioning of the scheme. 
• a change in the emissions budget that applies to the year in which the amendment is made
• if the cost containment reserve is released or units are auctioned at their minimum price 
• a force majeure event (e.g., an unforeseeable circumstance).

There is a one-off exception to this rule. Once the Government has set the first emissions budget, the Minister must amend regulations to ensure they prescribe new limits and price control settings for each of the next 5 calendar years. This includes prescribing new limits and price control settings for years 1 and or 2.

The Climate Change Commission makes recommendations on NZ ETS unit limits and price control settings to the Minister every year. The Minister must publicly consult on updates to settings and consider the Commission's recommendations. 

The unit limits that must be prescribed in regulations are: 

• a limit on the total number of NZUs available by auction.  This is comprised of annual auction volume plus the volume available within the cost containment reserve (CCR) and is shown in the table below 
• a limit on approved overseas units; which, as New Zealand currently has no access to offshore mitigation, is zero 
• an overall limit on units. It consists of units available by auction, by other means (e.g. from industrial allocation) and approved overseas units. This excludes consideration of units transferred for removal activities 

If the Minister recommends unit limits and price control settings that differ from the Climate Change Commission’s recommendations, the Minister must publicly explain why. 

The Government has decided to maintain the current price control settings and the cost containment reserve volumes (CCR), with minor changes from existing settings as follows:  

• to reflect Treasury Budget 2026 inflation forecasts
• to extend settings to 2031

The Government has decided to update unit limits as outlined in the table below. Auction volumes across 2027-2030 are unchanged from 2025 settings, and 1.1 million units are available in 2031.

These unit limits reflect the ‘Government-recommended auction volumes’ option consulted on, with a minor technical adjustment to 2031 auction volumes because of updated industrial allocation forecasts and the inclusion of a small, ongoing surplus reduction, based on consultation feedback.

In addition to annual NZ ETS settings changes, the Government regularly updates NZ ETS regulations to ensure they are fit for purpose. In 2026, the Government made the following updates to NZ ETS regulations: 

• Update default emissions factors (DEFs) for natural gas activities occurring in 2027 and error corrections for 2026. 
• Update DEFs for geothermal activities occurring in 2027 and error corrections for 2026. 
• Update DEFs for liquid fossil fuels for 2027 onwards. 
• The ‘increase information requirements package’ for unique emissions factor (UEF) waste applicants claiming a landfill gas efficiency of more than 60 percent. This update includes: 
  • requiring applicants reporting an LFG system efficiency of more than 60 percent to provide additional supporting evidence, 
  • a requirement for those operators to use the formula in Regulation 23D when calculating their emissions for their UEF application, and 
  • removing the 90 percent cap when calculating the efficiency of an LFG system. 
• Removing the use of the oxidation factor for applicants with an LFG system. 
• Establishing an ETS exemption for historic contaminated waste from verified Hazardous Activities and Industries List (HAIL) sites that ceased operation before 1991. 
• Removing the requirement for a statutory declaration in the following circumstances related to the ETS Register: 
  • opening a holding account 
  • appointing a primary representative 
  • adding a joint account holder. 
• Updating the price of carbon and synthetic greenhouse gas levies for 2027. 

The proposal to update the DEF for waste participants will not progress this year, as the preferred option following consultation was an activity-source based range approach to the DEF, which requires a longer lead in time. If you're a disposal facility operator who would like to be involved in the development of these changes, please contact waste.emissions@mfe.govt.nz