NZ’s Carbon Trading and Net-Zero Goal

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NZ’s Carbon Trading and Net-Zero Goal

To respond to the challenges of climate change and the Paris Agreement, New Zealand has enacted the Zero-Carbon bill in November 2019, which would serve as a framework to reduce greenhouse gas emission including methane and achieve net-zero emissions by 2050, and for the government to create policies on climate adaptation and mitigation (Climate change response, n.d.).

How NZ would reach net-zero emissions

There are several ways for New Zealand to reach net-zero emissions. A news article identifies seven changes that New Zealand can make to reach this goal such as:

  • the conversion of vehicles to electric,
  • eliminating fossil fuels industries that need heating up to 300°C,
  • double electricity production without using fossil fuels,
  • more research on how to reduce the amount of nitrogen that gets converted to nitrous oxide in animal urine, and
  • to reduce the amount of methane produced by ruminants, and to plant enough trees to cover the emissions gap.

New Zealand is already on the right track in using renewable energy for electricity. Eighty-one per cent of all electricity is produced primarily from hydroelectricity (58%), geothermal (18%), and the rest from gas (16%), wind (5%), and coal at 3% (MacManus, 2019).

Some industries like the dairy industry use coal for heating milk because coal is a cheaper fuel option, but coal emits carbon dioxide.

To offset emissions the government is allowing companies, like the diary industries to buy unlimited carbon credits at a fixed price of $25 per tonne. The Productivity Commission thinks that carbon credit must come up to at least $75 per tonne for companies to start to seriously consider using low-emissions technology (MacManus, 2019).

While it is not practical for some industries to switch to low-emissions technology because their current machines still have several years of life left on them and replacing their equipment would be very costly, some are switching to low-emissions technology for ethical reasons and probably it is time for a scheduled replacement (MacManus, 2019).

What does net-zero emission mean?

Achieving a net-zero status means that an organisation, in this case, a country has achieved an overall balance between emissions produced and emissions taken out of the atmosphere becoming carbon-neutral (Burke, 2019).   

The New Zealand Emissions Trading Scheme (NZ ETS) is the government’s tool to meet climate change target and to encourage entities and individuals to reduce GHG emissions. 

How does the NZ ETS work?

Trading involves three parties. The government, eligible foresters, and businesses or entities who want to offset their emissions.

The government gives eligible foresters unit for CO2 absorbed by their trees and they could sell these units on the NZ ETS market. Business with surrender obligations or have legal obligations to hand over their units must purchase enough units to cover their emissions. These units are then surrendered to the government.

A New Zealand Unit (NZU) is equivalent to one metric tonne of carbon dioxide or the amount of GHG that does as much damage as one tonne of carbon dioxide (About the New Zealand, 2019).

However, it is up to the emitter to decide whether to reduce their emissions or purchase units. The price for the units is the carbon price which is set by the supply and demand rule (About the New Zealand, 2019).

The Motu Economic and Public Policy Research has released a guide to the New Zealand Emissions Trading Scheme explain how the NZ ETS works, describes the system and how it has evolved over time.

To know more about the New Zealand ETS, visit the link below:

Source citation:

Climate Change Response (n.d.). New Zealand Parliament. Retrieved from https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_87861/climate-change-response-zero-carbon-amendment-bill

Burke, J. (2019, May 2). What does net zero mean? Green Biz. Retrieved from https://www.greenbiz.com/article/what-does-net-zero-mean

About the New Zealand Emissions Trading Scheme. (2019, December 18). Ministry for the Environment. Retrieved from https://www.mfe.govt.nz/climate-change/new-zealand-emissions-trading-scheme/about-nz-ets

Leining, Catherine and Suzi Kerr. 2018. A Guide to the New Zealand Emissions Trading Scheme. Report prepared for the Ministry for the Environment. Wellington: Motu Economic and Public Policy Research. Retrieved from https://motu.nz/assets/Documents/our-work/environment-and-agriculture/climate-change-mitigation/emissions-trading/ETS-Explanation-August-2018.pdf

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