Compliance and infringements in the New Zealand Emissions Trading Scheme

The Climate Change Response Act includes strong measures to counteract non-compliance. Read more about these measures here.

Improving rates of compliance within the NZ ETS

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.

The automatic surrender/repayment penalty will not apply to small foresters until 1/1/2023. In the meantime they will be subject to the penalties that existed in the Climate Change Response Act prior to the reforms enacted in mid 2020.

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.

Introduction of low-level infringement offences

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

Infringement offences are specified in regulations. The first set of infringement offences are expected to be set in Regulations and are planned to take effect in 2022 subject to Cabinet approval.

Progress on introduction of low-level infringement offences

The Government is currently drafting regulations for 12 new infringement offences relating to the New Zealand Emissions Trading Scheme (NZ ETS) and Synthetic Greenhouse Gas levy (SGG levy).

NZ ETS and SGG levy related infringement offences are intended to 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]

The full list of offences is available in Table 1 of this cabinet paper.

Infringement offence regulations were intended to come into effect alongside other changes to the NZ ETS compliance regime on 1 January 2021 but were delayed due to COVID-19. The Government decided to create the new infringement regime in 2019 following consultation in 2018.

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.

We will provide further updates and information on the introduction of the infringement offence regulations later this year.

For more information see the NZ ETS and SGG Levy Infringement Offence cabinet paper.