Compliance and infringements in the New Zealand Emissions Trading Scheme

The penalties in the NZ ETS are designed to increase rates of compliance and ensure participants meet their obligations to enable New Zealand to meet its climate change targets.

The Environmental Protection Authority is the agency responsible for monitoring compliance obligations in the NZ ETS. You can find out how to comply with your obligations here [Environmental Protection Authority]

Surrender/repayment penalty

An automatic surrender/repayment penalty applies when participants fail to surrender or repay units by the due date. Each overdue unit will incur a cash penalty of three times the current market price.

Reporting penalty

A reporting penalty applies when an emissions return is not submitted by the due date, or an incorrect emissions return is submitted, this includes failing to submit annual or closing allocation adjustment or providing incorrect information in allocation application or adjustment.

The penalty is based on behavior (known as 'culpability'), and may be up to a maximum of 100 per cent of the current market price per unit, if the participant has knowingly reported their emissions incorrectly.

These penalties apply in addition to ‘making good’ on the underlying obligation.

For both the above penalties, the current market price used is specified in Regulations that are updated annually and is based on an average price for the previous calendar year.

The Act includes the ability to set infringement offences in regulations to deter low-level non-compliance with the rules of the NZ ETS and the Synthetic Greenhouse Gas levy. 

These strict liability offences result in financial sanctions but not convictions for offenders. Prosecutions are still available for the most serious cases of offending. This will improve compliance outcomes while minimising administrative costs.

Infringement offences are specified in the Climate Change Response (Infringement Offences) Regulations 2021 regulations.

See Climate Change Response (Infringement Offences) Regulations 2021 regulations (NZ Legislation).

Purpose of low-level infringement offences

NZ ETS and SGG levy related infringement offences target low-level non-compliant conduct that is largely administrative in nature. Some examples of infringement offences are when an individual or organisation:

• does not provide information to an enforcement officer when they are required to do so under the Act 
• fails to keep records as required under specific sections of the Act
• fails to notify the EPA they are carrying out an activity under Schedule 3 of the Act [New Zealand Legislation website]

Infringement offences are strict liability offences (like speeding offences) and therefore infringement notices can be given regardless of whether the conduct was intentional. The regulations will include both infringement fees and fines. 

Infringement fees are issued by notice directly to the non-compliant person. Infringement fines are issued through the Court by an enforcement agency filing a charging document. 

Prosecutions may still occur if offending is severe.