This page provides an overview of the allocation of New Zealand Units to reduce impacts of the New Zealand Emissions Trading Scheme.
The Government provides free New Zealand Units (NZUs) to some sectors to reduce the cost impacts of the New Zealand Emissions Trading Scheme on those sectors. Some participants in the NZ ETS can earn NZUs for greenhouse gas removals.
Types of free allocation
The Government provides free allocations of NZUs to industry for activities (production processes) that are both emission-intensive and trade-exposed. This is called industrial allocation and recognises that NZ ETS costs might affect the international competitiveness of some businesses.
The Government also provided one-off free allocations to compensate for the loss of asset value resulting from the NZ ETS for fishing and forestry.
Fishing quota owners were given some NZUs in a one-off allocation in 2010 to compensate for the effect of increased fuel costs from the NZ ETS on the value of their fishing quota.
Allocation was provided to owners of pre-1990 forests to help offset the decrease in land value which was caused by less flexibility in terms of how land could be used. This is because owners of pre-1990 forest land face obligations under the NZ ETS if the land use is changed from forestry (deforested).
Some participants in the NZ ETS are given units for greenhouse gas removals. This is different from free allocation because the participant is earning the NZUs for removing emissions.
There are two ways participants can earn NZUs: post-1989 forestry and other removal activities.
Foresters with forests planted after 1989 are able to voluntarily enter the scheme and earn NZUs for the carbon the trees absorb.
Other removal activities
Participants can earn NZUs for destroying synthetic greenhouse gases (SGGs) or exporting them out of New Zealand, and for exporting some products that contain greenhouse gases. If these gases are ultimately emitted, the associated emissions become the responsibility of the country that they are exported to.
For more information about SGGs see Synthetic greenhouse gases in the NZ ETS.