NZ ETS forecasts of emissions, removals and entitlements from the Crown’s financial forecasting

The data in the table and graphs below show the forecast emissions and removals taken from the Government’s financial forecasts relating to the NZ ETS. The forecasts are used for the Government’s Budget Economic and Fiscal Updates published by the Treasury. The most recent updates can be found on the Treasury’s Budgets and forecasts webpage.

Please note that the Crown prepares these ETS forecasts for a very specific purpose which is to inform the Government’s financial forecasts. These forecasts are completed twice per year in a non-election year, and in an election year there may be an additional forecast update. These forecasts don’t easily reconcile with other ETS data including forestry projections reports published from time to time by the Ministry of Primary Industries.

The forecasts predict removals, industrial allocation, auction volume, and emissions over time. Removals, industrial allocation, and auction volume are grouped together because they will lead to New Zealand emission units (NZUs) entering the NZ ETS. Emissions lead to NZUs being surrendered in the NZ ETS. Cost Containment Reserve (CCR) NZUs are shown at the bottom of the table – these are extra units that are made available at auction if a certain price is met.

For more information on auction units, see the annual updates to emission unit limits and price control settings.

It is important to be aware that these forecasts are based on when the activity (the emissions and removals) is forecast to occur. We don’t recommend using the financial forecasting data to predict unit flows. This is primarily because the surrender or allocation of the units relating to those emissions or removals will not happen until the next calendar year or later for some forestry activities. This is different for units bought at auction or provided through free industrial allocation. Auctioned units are transferred to a purchaser’s Emissions Trading Register account soon after they have been purchased. Most industrial allocations are provided in advance of the emissions, on a provisional basis, and then ‘trued up’ the following year once the actual emissions are known.

Annual emissions reporting is optional for forestry, and a forester only has to submit an emissions return at the end of a Mandatory Emissions Reporting Period (MERP). The forestry forecasts assume all foresters report their emissions every year, however foresters may report at the end of the MERP. This is why we have added the ‘End of MERP’ totals to the table below. The end of MERP total is more useful when comparing forecasts with actual emissions returns. If you are using the MERP total in analysis it’s important to use it instead of the annual figures to avoid double counting.

Refer to the detail about the forestry forecasts for additional information

For understanding NZ ETS market dynamics, we suggest considering a model designed for the purpose, such as the ETS market model, rather than the financial forecasts. While the ETS market model shares many of the underlying data sources as the financial forecasts, it is specifically designed to allow users to explore and test different market outcomes based on their own judgements and assumptions.

More information about the ETS market model is available in the Technical Annex of the NZ ETS Settings consultation document.

Table – Forecast breakdown for 2026 to 2031

This data is accurate as of July 2026 and there will be a further update in mid-2027 following the release of the Government’s annual Budget.

The numbers in the table below are in millions of tonnes of carbon dioxide equivalent (Mt CO₂e).

*MERP – Mandatory Emissions Return Period. As noted above, if you are using the MERP total in analysis it’s important to use it instead of the annual figures to avoid double counting.

**cost containment reserve (CCR)

• The forecasts feed into the Crown's Economic and Fiscal Updates published by the Treasury and are updated every six months in March and October and before an election. We will endeavour to publish future updates promptly after the relevant fiscal update is published.
• The forecasts above are based on business-as-usual projections and are subject to change.
• The methodologies used vary depending on the data available and are underpinned by certain assumptions. The forecasts are best estimates based on current conditions.
• In times of normal activity, these assumptions provide us with reasonable projections of activity. In periods of disruption resulting in changes to activity and economic shifts, some of these relationships may weaken or no longer hold.
• Stakeholders within the NZ ETS may also have their own sources of information or differing views on how external factors will impact emissions or removals.

Forecasts for forestry are challenging because there are many factors that influence forestry decision making in the NZ ETS.

They include the following factors.

• It is voluntary for post-1989 forest owners to register their forest in the scheme and they can choose to deregister at any time.

• Typically, post-1989 foresters harvest their pine plantation exotic trees around 28 years of age. However, considerations such as log price, carbon price and other external factors may influence when a forester chooses to harvest and when the NZUs are surrendered to the Crown.

• Foresters only need to submit a mandatory return every five years, but they can choose to submit a voluntary report annually. The previous mandatory emissions reporting period (MERP) was slightly different in that it is only three years long. This is to align with international reporting. The previous MERP is known as MERP 4, and covers forestry removals and deforestation and harvesting in the ETS between 2023 and 2025. MERP 5 covers the five year period between 2026 and 2030.

• A carbon accounting approach known as ‘averaging’ is applied to all new post-1989 forests entering the NZ ETS from 2023. (Averaging was optional for forests registered from 1 January 2019 to 31 December 2022 and became compulsory for all forests registered from 1 January 2023.) Forest owners who use averaging will not be required to surrender NZUs when they harvest (if they replant). Participants would instead receive NZUs as their forest grows up-to an average level of long-term carbon storage and then stop earning units thereafter. 

The deforestation forecasts assume 100 per cent compliance and that 100 per cent of post-1989 forest owners submit an annual voluntary emissions return.

For more information on forestry see About forestry in the Emissions Trading Scheme (MPI website).

We welcome your feedback on the data.

Email: etsfeedback@mcert.govt.nz