How the ETS works
The ETS puts a price on greenhouse gas emissions. This provides an incentive for people to reduce emissions and plant forests to absorb carbon dioxide.
Environmental accounting
Certain businesses are required to acquire and surrender emission units to account for their direct greenhouse gas emissions or the emissions associated with their products.
An emission unit represents one metric tonne of carbon dioxide or the equivalent of any other greenhouse gas (carbon dioxide equivalent). There are lots of unit types and a variety of emission units are traded throughout the world.
Watch an introduction to the ETS – YouTube video (3:57)
It's about sustainability
The primary aim of the ETS is to encourage environmentally sustainable behaviour.
In New Zealand, sustainability is defined as:
- good governance that supports and maintains profitable enterprises
- encouraging and protecting the environmental integrity of both our ecosystems and the social wellbeing of our communities.
Find out more on the NZ Sustainability Dashboard Project website
The ETS and MPI
MPI's main role is to administer the ETS for the forestry sector. We do this in partnership with the Ministry for the Environment (MfE) and the Environmental Protection Authority. We also work with MfE on climate change policy for the agriculture and forestry sectors.
Find out more about forestry in the emissions trading scheme
Farming and the ETS
Agricultural processors must report the on-farm biological emissions associated with the production of the milk and meat they process to the Environmental Protection Authority.
The term "agricultural processors" includes:
- meat processors
- dairy processors
- nitrogen fertiliser manufacturers and importers
- live animal exporters.
There are some exemptions to these categories, including:
- wool and velvet processors
- egg producers.
Farmers and producers are not currently required to surrender ETS units for the biological emissions produced by agricultural activities. This is consistent with global practice – no country in the world imposes a cost on biological emissions from agriculture.
The Government has indicated surrender obligations would not begin unless:
1. there are economically viable and practical technologies available to reduce emissions
2. our trading partners make more progress on tackling their emissions in general.
Find out about agriculture and greenhouse gas emissions
The Paris Agreement
The Government ratified the Paris Agreement in October 2016. The Agreement commits New Zealand to an ambitious target – to reduce emissions to 30% below 2005 levels by 2030. To meet our commitments under the Agreement, changes may need to be made to the ETS and our other climate change policies and programmes.
Reaching our goals
Two reference groups have been established by MPI with the sectorsannounced to help investigate and manage any potential changes.changes:
The Biological Emissions Reference Group
- The purpose of the Group is to build robust and agreed evidence on what the sector can do on-farm to reduce emissions, and to assess the costs and opportunities of doing so.
- The Group will not write policy or make recommendations.
- It is joint-chaired by Chris Kerr (MPI) and Kara Lok (DairyNZ).
- Members have signed the Terms of Reference and agreed on an initial list of priority projects.
- The Ministry for Primary Industries is leading a transparent process through the Group to commission and contract this analysis from third parties.
- The evidence from this research will be published in the form of an interim report in early 2017, followed by a final synthesis report in late 2017.
- Agendas to date:
Download the Biological Emissions Reference Group Terms of Reference
The Climate Change Forestry Reference Group
- The purpose of the Group is to explore and test evidence, analysis, and policy options with experts in order to inform and support officials.
- The Group will not write policy or make recommendations.
- It is chaired by Stuart Anderson (MPI).
- Members have signed a Terms of Reference and have been supporting officials on a number of key issues as part of the current review of the New Zealand Emission Trading Scheme.
- Agendas to date:
- If you'd like the Climate Change Forestry Reference Group to consider an issue or topic, email climate.change@mpi.govt.nz .
Download the Climate Change Forestry Reference Group Terms of Reference
the Biological Emissions Reference Groupthe Climate Change Forestry Reference Group.
The new groups will help test any changes that may be made to forestry in the ETS. They will also take a fresh look at our agricultural sector and what it can do to reduce emissions.
Both reference groups will meet quarterly until the end of 2018.
The Biological Emissions Reference Group began meetings in June 2016.The Climate Change Forestry Reference Group held its first meeting in September 2016.
If you'd like the Climate Change Forestry Reference Group to consider an issue or topic, email climate.change@mpi.govt.nz .
Read the Ministers' press release on the Beehive website
Find out more
- New Zealand's Emissions Trading Scheme – Ministry for the Environment
- Emissions Trading Scheme and Register – Environmental Protection Authority
Who to contact
If you have questions about MPI's role in the ETS or what you can do to reduce your emissions by planting forests, email climate.change@mpi.govt.nz.