Unit flow forecasts

The information below provides a forecast of the number of emissions units expected to be supplied into the New Zealand Emissions Trading Scheme and how much demand there is for units.

(*) Data will be provided once the Government has published the next fiscal forecast report.

The forecasts show annual NZ ETS unit supply will decrease over the period while forecast demand for units increases.

From 2023, demand for NZUs is projected to increase above the volume supplied. Increased demand is predominantly driven by forecasts of increased surrenders due to forestry harvesting in 2024, 2025 and 2026.

The unit supply and demand forecasts are based on business-as-usual projections and are subject to change. The forecasts are based on Budget Economic and Fiscal Updates published by the Treasury and will be updated every six months in March and October or before an election. The indicators used to create the forecasts are the best that we have available at a point in time.

The methodologies used vary depending on the data available and are underpinned by certain assumptions. New emissions reduction policies, closure of large emissions intensive businesses or the development of a new cost-effective emissions reduction technology are not factored in.

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. As a result, the current projections have an increased level of uncertainty mainly due to COVID-19.

Stakeholders within the NZ ETS may also have their own sources of information or differing views on how external factors will impact emissions.

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

They include the following:

• It is voluntary for post-1989 forester 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. Recent higher NZU prices may encourage some forest owners to delay harvesting but there is limited information on how extensive this may be. 
• Foresters only need to submit a mandatory return every five years but they can choose to submit a voluntary report annually. The current mandatory emissions reporting period closed in 2022.
• Reforms to the NZ ETS will change the carbon accounting approach for rotational post-1989 forests from stock change to a method known as ‘averaging’. The averaging method will apply to all new post-1989 forests entering the NZ ETS from 2023. (Averaging will be optional for forests registered from 1 January 2019 to 31 December 2022, and become 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 surrender 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 visit About forestry in the Emissions Trading Scheme [MPI website].