Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


New Zealand emissions trading scheme Q & A

New Zealand emissions trading scheme

Questions and answers

See also...
Emissions trading overseas (PDF)

What is an emissions trading scheme?

‘Emissions trading’ is a market-based approach for achieving environmental objectives. A cap and trade emissions trading scheme sets an overall limit on the quantity of greenhouse gas emissions that can be emitted. Emissions trading schemes often operate on a ‘net’ basis (ie, there may be an increase in emissions from one source, or even one country, but this increase is offset by emission reductions elsewhere).

How will the emissions trading scheme help the environment?

An emissions trading scheme will help us meet our international obligations to reduce greenhouse gas emissions.

In the short term, it is clear that introducing an emissions trading scheme will result in emissions reductions relative to business as usual (ie, emissions might continue to rise, but at a slower rate).

The long-term effects are likely to be significant, particularly if predicted developments in technology and complementary measures emerge, such as energy-efficiency programmes. This is because the price of things with carbon in them, such as petrol, cement and electricity production, will go up relative to the price of things without carbon, such as biofuels and solar water heating. As a result, what firms and households actually do to adopt more resource-, energy- and emissions-efficient practices will change.

We also hope that our action on climate change will encourage other countries to take action.

Why is the government so concerned about climate change? Will New Zealand really be affected?

For New Zealand, the impacts of climate change are likely to mean higher temperatures, a higher sea level, and more frequent and more extreme weather events, such as droughts and storms. Different regions will be affected differently. For example, the east of the country is expected to become drier and the west wetter.

These impacts are expected to have significant effects on our economy and way of life. While reducing global emissions of greenhouse gases will reduce the severity of these impacts in the long term, the gases the world has already emitted mean that we will face some degree of climate change.

Which greenhouse gases will be covered?

The New Zealand emissions trading scheme will cover emissions of the following six greenhouse gases: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). These are the greenhouse gases covered by the Kyoto Protocol.

What are emission units and carbon credits?

An emission unit can represent any of the greenhouse gases named above. A carbon credit is one kind of emission unit and relates only to carbon dioxide directly, or as the climate change equivalent of the other gases.

A variety of emission units are traded in voluntary and mandatory emissions trading schemes throughout the world, for example:

* The Kyoto Protocol provides for six types of emission unit, all of which represent one tonne of carbon dioxide-equivalent greenhouse gas emissions

* The EUA, which is the unit of trade in the European Emissions Trading Scheme and includes only carbon dioxide

* Many other kinds of voluntary “grey market” units, including the units created through Landcare’s CarbonZero programme in New Zealand (these are being called “carbon credits” on TradeMe).

Why do we need to control our greenhouse gas emissions?

Climate change is not a uniquely New Zealand problem – it is a global problem.

The rate at which the world is emitting greenhouse gases is unsustainable and future growth in emissions, if unchecked, could lead to drastic changes in the Earth’s climate, impacting on all economies and societies. New Zealand’s greenhouse gas emissions are small from a global perspective (around 0.2 to 0.3 per cent of global emissions). However, on a per capita basis we are a high emitter by international standards.

If New Zealand is to be part of the world’s solution to climate change, we must take action to be more sustainable.

Why has the government chosen emissions trading as part of its climate change response?

There has been wide consultation with business and stakeholders on a range of possible policy responses to climate change. These included emissions trading, a carbon tax, direct regulatory measures, and other possibilities.

Introducing an emissions trading scheme is a fair and flexible way to reduce emissions at least cost. There was broad support among stakeholders for emissions trading over other options.

How will an emissions trading scheme impact on our economy?

We already have obligations under the Kyoto Protocol – an emissions trading scheme is simply a mechanism for meeting those obligations.

Kyoto compliance carries costs, but the overall effect on the economy is expected to be negligible. Economic modelling estimates that instead of growing 15 percent between 2005 and 2010, the economy might grow by 14.9 percent. Emissions trading will affect different players in the economy differently but, for example, we expect that its impact for the average household would be no more than a few dollars a week.

Transforming to a more sustainable economy will also create many opportunities. New Zealand is already a world leader in technology in important areas like agriculture, forestry and biotechnology. There will be significant new economic and trade opportunities for those sectors if they are at the forefront of developing new carbon-friendly technology and products.

Am I involved in the scheme and do I need to do anything?

Over time, the entire economy will be participating in the New Zealand emissions trading scheme, in the sense that the cost of greenhouse gas emissions will be reflected in the price of the fuels, foods, and other goods and services we buy. In this way, the emissions trading scheme sets up a framework in which we are all contributing and, over time, will change behaviour towards more resource-, energy- and emissions-efficient practices.

However, it is not proposed that small or medium businesses (with the exception of some parts of forestry and agriculture) or households will face any direct obligations.

Why are firms and not individual citizens covered by the emissions trading scheme?

If a scheme were to cover individuals, each individual would be granted a quantity of emission units and would then be charged for the emissions in the goods and services they consume. Although it may have some attractions in making the environmental effects of individual decisions more transparent, such a scheme would be very expensive to run.

By choosing instead to impose scheme obligations on a small number of main firms in each sector, the costs of compliance and administration are kept low. The behaviour of individuals and households, as well as firms outside the scheme, is still affected indirectly through price changes flowing through the economy.

How will emissions trading impact on me?

That depends on the choices you make.

Initially, the most obvious impact of emissions trading will be on the price of electricity and petrol when those sectors enter the scheme (2010 for energy and 2009 for transport). Over time, there will also be an emissions price embedded in all of the other goods and services we purchase, because they require energy to produce and transport. Eventually, the cost of greenhouse gas emissions will even be reflected in the disposal of waste and in agricultural products such as milk.

The government is looking at options to help households through the transition to a low-emissions energy system. The government will put in place programmes to reduce the financial impacts on low- and modest-income households, while still ensuring incentives remain for people and businesses to become more energy-efficient.

You will be able to respond to emissions trading in a number of ways. The government has in place a range of energy-efficiency and conservation programmes to help consumers and businesses reduce their energy use and the amount of money they spend on energy. It is intended that the emissions trading scheme will encourage households and firms to move to more energy-efficient practices, which will in turn reduce the financial effects of the scheme.

How much will the emissions trading scheme cost me?

That depends on the choices you make. If you take no action to reduce your energy consumption, the following table shows the expected impacts on households, assuming two different prices for emissions.

Click to enlarge

Average increase in household energy expenditure (eg, electricity, coal, natural gas and transport fuels) per year $100-$200 $170-$330

Approximate percentage of total household expenditure 0.3%-0.5% 0.5%-0.8%

As mentioned above, the government is looking at options to help households through the transition to a low-emissions energy system. The government will put in place programmes to reduce the financial impacts of higher electricity prices on low- and modest-income households, while still ensuring incentives to adopt energy-efficient options remain.

Of course, if households use energy more efficiently – by conserving power in the home or using public transport, for example – the impact on household costs will be reduced. As mentioned above, the government has in place a range of energy-efficiency and conservation programmes to help consumers reduce their energy use and the amount of money they spend on energy, and other programmes will be developed over time.

When will my power bill go up? How much will it cost me?

Emissions trading puts a price on fossil fuels to encourage more renewable energy. Coal, gas, and geothermal fuels will be required to begin incorporating the cost of their emissions under the emissions trading scheme from 2010, which will flow through to the price of electricity. You can expect to see the impact on your energy bills from this time or slightly before, as energy producers anticipate the change in their costs. A price increase of 4 or 5 percent may result.

However, the government is looking at options to help residential consumers through the transition to a low-emissions energy system. And the government already has a range of energy-efficiency and conservation programmes in place to help consumers and businesses reduce their energy use and the amount of money they spend on energy.

When will petrol prices go up? How much will it cost me?

Users of liquid fossil fuels (petrol, diesel) will be required to begin incorporating the cost of their emissions under the emissions trading scheme from 2009, which will flow through to the price of petrol and diesel. Fuel prices are likely to rise from this time or slightly before.

We expect fuel prices may increase by about 4 cents a litre.

Will the government help households adjust to these changes?

The government is looking at options to help households through the transition to a low-emissions energy system. It will put in place programmes to reduce the financial impacts of higher electricity prices for low- and modest-income households, while still ensuring incentives for energy-efficient choices remain.

In addition, existing assistance programmes for the elderly and people on low incomes may be available, such as the Accommodation Supplement, the Special Needs Grant, and the Special Benefit.

I want to help the environment. How can I?

There are many simple actions you can take to help reduce your impact on the environment. Making a real difference will require everyone to think carefully about the energy they use, the way they build their homes and the waste they produce. Some examples of actions that individuals can take are as follows.

* Use cars less often – use public transport, car-pool, walk or ride a bike.

* Use less electricity – turn off lights and appliances when they are not in use, use heaters sparingly, and keep the heat in by closing windows and doors and drawing curtains.

* Reduce waste – recycle, compost, reuse and choose less packaging.

* To find out more about things you can do around the home to reduce your impact on the environment, visit:



Where do I go for more information?

For more questions and answers, visit


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Not Buying What Todd Muller Is Selling

Chloe Swarbrick is number three in the Greens Party list released this morning. Todd Muller has released his new party line-up today, which will excite everyone who still wants to know what Gerry Brownlee and Judith Collins will be up to in future. Wider point being : Swarbrick is a household name after three years in Parliament, and has been steering our cannabis laws towards a national referendum at this year’s election. Todd Muller has spent twice as long in Parliament as Swarbrick and yet – until last week – no one beyond his immediate family and friends had ever heard of him... More>>


National: "Todd Muller Announces Shape Of Next Government"

National Party Leader Todd Muller has announced the line-up of the next Government. “New Zealand is facing perhaps the toughest time that almost anyone alive can remember. “We are borrowing tens of billions of dollars to get us through this crisis. There ... More>>


Lockdown Rules: Timeline For Moving To Level 1 Needed

The BusinessNZ Network is calling for more clarity about the conditions under which businesses can move to Covid level 1. The network is concerned about large numbers of businesses that are at risk of closure if restrictions continue at the current ... More>>

Gordon Campbell: On National’s Day Of Reckoning

Congratulations. You are one of the 55 members of the National caucus being called together tomorrow to choose who will lead you to either (a) catastrophic or (b) honourable defeat on September 19, thereby saving some (but not all) of the jobs currently on the line. Good luck. Your decision process starts NOW... More>>


Budget 2020: Jobs Budget To Get Economy Moving Again

Investments to both save and create jobs in Budget 2020 mean unemployment can be back to pre COVID-19 levels within two years and could see the economy growing again as early as next year. More>>


Covid-19 Response: Law Setting Up Legal Framework For Covid-19 Alert Level 2 Passes

The law establishing a legal framework for the response to Covid-19 has passed its final reading and will become law in time for the move to Alert Level 2 tonight.
This is a bespoke Act designed specifically to stop the spread of COVID-19... More>>


ACT: Parliament Quits MP Cut Pay Debate To Go Home Early

“In an outrageous move, Parliament has today passed voluntary MP pay cuts and avoided any debate over whether to make them compulsory and transparent”, says ACT Leader David Seymour.... More>>


Trans-Tasman Bubble: PMs Jacinda And Morrison Announce Plans

Australia and New Zealand are committed to introducing a trans-Tasman COVID-safe travel zone as soon as it is safe to do so, Prime Minister Rt Hon Jacinda Ardern and Prime Minister the Hon Scott Morrison MP have announced... More>>


The Dig: Steady State Economics: We’ve Got Some (systems) Thinking To Do

In this time of impending economic and ecological crises, we urgently need to aim for a sustainable or ‘steady state’ economy. In order to get there, we will need to adopt a ‘systems-thinking’ outlook taking into account the interconnections of our complex world.

In short, we’ve got some systems thinking to do... More>>


Election 2020: Parties Get Into gear

The Green Party is pleased to reveal its candidate list for the upcoming election. With a mix of familiar faces and fresh new talent, this exceptional group of candidates are ready to lead the Greens back into Government. Using the most democratic list ... More>>


Insight Into Regenerative Agriculture In New Zealand

There is a fast growing movement in New Zealand that has been happening out in paddocks, fields, gardens and hill country across the nation. It is a movement that holds the promise to reshape our productive land use industries towards systems that work with the natural environment to regenerate the land. The movement is that of regenerative agriculture. More>>


Covid-19: Tracer App Released To Support Contact Tracing

The Ministry of Health has today formally released the NZ COVID Tracer app to support contact tracing in New Zealand. Kiwis who download the app will create a digital diary of the places they visit by scanning QR codes displayed at the entrances to ... More>>


Gordon Campbell: On The Dodgy Politics Of Easing Level 3

As countries around the world tentatively emerge from lockdown, a lot of political noise is being generated by politically-driven arguments that (a) the safeguards need to be lifted faster and (b) the lockdown itself was an over-reaction likely to leave lasting economic damage in its wake... More>>


National: No Show By Treasury Shows Govt In Full Dismissal Mode

Treasury’s last minute decision not to bother showing up at the Epidemic Response Committee shows an arrogant Government that’s happy to dismiss scrutiny, National’s Finance spokesperson Paul Goldsmith says. “Treasury Secretary Caralee McLiesh was ... More>>


Govt: Concern At Introduction Of National Security Legislation For Hong Kong
Foreign Affairs Minister Winston Peters says the New Zealand Government has reacted with concern at the introduction of legislation in China’s National People’s Congress relating to national security in Hong Kong... More>>






InfoPages News Channels