How the ETS works
The ETS puts a price on greenhouse gas emissions. People or organisations involved in the Emissions Trading Scheme (generally land owners, businesses, or people with forestry rights) can earn credits for business activities that absorb carbon dioxide (like planting or managing forests). When they earn credits, they can either:
- trade them
- hold onto them
- surrender them back to offset their activities that emit greenhouse gases (like burning fossil fuels) or reduce stored carbon (like harvesting trees).
Emitters can also purchase credits to offset their 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)
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
Agriculture and the ETS
Farmers and producers are not currently required to surrender emission units for the biological emissions produced by agricultural activities.
Find out about agriculture and greenhouse gas emissions
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.
Purpose of the ETS
The New Zealand ETS supports global efforts to reduce the emission of greenhouse gases. It does this by helping New Zealand meet its:
- international obligations under the Paris Agreement
- domestic targets by 2050, set out in the Climate Change Response Act 2002
- emissions budgets, set out in the emissions reduction plan for 2022 to 2025.
Read more about our emissions targets and budgets on the Ministry for the Environment (MfE) website:
New Zealand's greenhouse gas emissions targets and reporting – MfE
Aotearoa New Zealand's first emissions reduction plan, including the first emissions budget – MfE
The Paris Agreement
New Zealand ratified the Paris Agreement in October 2016 and it took effect in 2020. The agreement commits New Zealand to a Nationally Determined Contribution, updated in 2021, to reduce net greenhouse gas emissions to 50% below gross 2005 levels by 2030.
Read more about the Paris Agreement – MfE
Transforming the Forestry ETS
The transformation programme
To support New Zealand’s climate change ambitions, Te Uru Rākau – New Zealand Forest Service is transforming the Forestry ETS. New processes and technology will simplify the ETS for users and support greater accuracy for current and future participants.
Rebuilding forestry ETS infrastructure: Single stage business case [PDF, 7.1 MB]
Updates to the ETS
Between 2015 and 2021, the Government consulted on changes and improvements to the ETS. Changes were legislated in the Climate Change Response (Emissions Trading Reform) Amendment Act 2020, and most of the new provisions that relate to forestry will come into effect on 1 January 2023.
Find out more
New Zealand's Emissions Trading Scheme – MfE
Emissions Trading 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 ForestryETS@mpi.govt.nz
