The Emissions Trading Scheme, or ETS, is New Zealand's primary response to global climate change.
The purpose of the ETS is to support and encourage global efforts to reduce greenhouse gas.
We’re all in this together
All coal producers – including us – are mandatory participants in the ETS. Under the ETS, we’re required to submit our emission units – sometimes called ‘carbon credits’ or ‘New Zealand Units’ (NZUs) – to the government on an annual basis.
We’re proud to participate in the New Zealand ETS, purchasing emission units which we then surrender to the New Zealand Government. These units are exchanged for the climate change gases that result directly from our mining activities and from the burning of our coal products in New Zealand. Makes perfect sense.
Creating incentives for positive change
By putting a price on greenhouse gases the ETS provides an incentive on everyone to reduce emissions and invest in energy efficiency and develop new technologies. It also helps New Zealand to meet our obligations under the UN Framework Convention on Climate Change – also known as the Kyoto Protocol.
The NZ ETS already operates in many sectors including the mining industry and is designed to move the cost of greenhouse gas emissions onto those who cause them. The ETS provides incentives for managing greenhouse gas emissions, investing in clean technology and renewable power generation, and activities that absorb greenhouse gases (such as planting trees). The purpose? To reduce New Zealand’s net greenhouse gas emissions.
International ETS influence
Every country who made commitments to a target for the first commitment period of the Kyoto Protocol were required to retire emission units equal to their actual greenhouse gas emissions for the commitment period, which ran from 2008 to 2012. New Zealand committed to limit emissions to 1990 levels on average over the first commitment period or to take responsibility for any emissions over this level.
The end of the Kyoto true-up period on 18 November 2015 was the deadline for emission retirement. New Zealand completed its retirement transaction in October 2015.
Adopted under the United Nations Framework Convention on Climate Change (UNFCCC) in December 2015, the new global agreement on climate change commits all countries to take action. The Paris Agreement entered into force on 4 November 2016 and takes effect globally from 2020. This means New Zealand’s mitigation commitments (its Nationally Determined Contribution) will apply from 2021.
Its purpose is to:
- keep the global average temperature to well below 2° C above pre-industrial levels
- pursue efforts to limit the temperature increase to 1.5° C, with an aim to reach peaking of global greenhouse gas emissions as soon as possible
- reach net-zero emissions by the second half of the century
- increase countries ability to adapt and reduce vulnerability to the impacts of climate change
- ensure financial flows support the development of low-carbon and climate-resilient economies.
New Zealand on a global stage
New Zealand has also set itself a target to reduce greenhouse gas emissions by 30% below 2005 levels by 2030.
New Zealand has different programmes in place to ensure we meet the 2030 target and transition to a low-emissions and resilient economy, including:
- Low Emissions Economy Transition Hub
- Productivity Commission inquiry
- New Zealand Emissions Trading Scheme (NZ ETS) including improvements to the NZ ETS
- Biological Emissions Reference Group (BERG)
- Forestry Reference Group
- International Carbon Markets Project.
Low Emissions Economy Transition Hub
The 2017 government budget provided $4 million in funding and mandated work across government to provide costed, tested and modelled policy options for meeting New Zealand’s emission reduction targets under the Paris Agreement. This work will be undertaken by bringing Natural Resources Sector agencies together in a Low Emissions Economy Transition Hub.
The transition hub will provide advice on the economic trade-offs involved in meeting New Zealand’s 2030 target. This work will be informed by the Productivity Commission recommendations including options on the balance of domestic emissions reductions, forestry, and international emissions reductions that will contribute to meeting New Zealand’s 2030 target.
Productivity Commission Inquiry
The Productivity Commission is looking at how New Zealand can maximise the opportunities and minimise the costs and risks of transitioning to a lower net emissions economy.
This will result in a final report and recommendations on how New Zealand should manage the transition, while still maintaining and improving the incomes and prosperity of New Zealanders.
NZ Emissions Trading Scheme update
In a recent review of NZ ETS, the Government made a decision on four proposals to improve the operation of the NZ ETS in the 2020s.
The proposals are to:
- introduce auctioning of units, to align the NZ ETS to climate change targets
- limit participants’ use of international units when the NZ ETS reopens to international carbon markets
- develop a different price ceiling to eventually replace the current $25 fixed price option
- coordinate decisions on the supply settings in the NZ ETS over a rolling five-year period.
Biological Emissions Reference Group
Bringing together a wide range of industry stakeholders to collaborate with Government, this group works to build a solid evidence base about biological emissions. It helps ensure New Zealand has the best possible information on what can be done now by the sector to reduce biological greenhouse gas emissions, and the costs/opportunities of doing so. This evidence base will inform the work of the Low Emissions Economy Transition Hub.
Forestry Reference Group
Forestry is a major part of New Zealand's economy and plays an important role in helping us meet emission reduction targets. The Group was established to test evidence, analysis and proposed changes to climate change forestry policy, in particular the NZ ETS.
International carbon markets project
The international carbon markets project was established in 2016 to identify linking options, with a view to enabling New Zealand to source international emission reductions in the 2020s.
New Zealand is currently in discussions with a number of countries about potential cooperation opportunities.
Environmental integrity principles and rules are also being developed for any international emission reductions that may help New Zealand meet its 2030 target. These would apply to international units that would be accepted into the NZ ETS. This environmental integrity work will involve working with both domestic and international stakeholders.