Reviewing the Emissions Trading Scheme
A Brief History of the Emissions Trading Scheme (ETS) in New Zealand
In 2008, the New Zealand Government introduced an emissions trading scheme (ETS) for greenhouse gases. It required upstream energy suppliers, the users of imported fossil fuels, and industries with CO2 process emissions, to surrender a New Zealand Emissions Unit, for every tonne of greenhouse gas (GHG) that would be subsequently be emitted. Upstream suppliers pass on the costs of these emission units to downstream users.
The Government was aware that energy-intensive, trade-exposed industries would suffer competitively if they were fully exposed to this cost. It therefore provided a free allocation of up to 90% of the emission units required to these industries. It provided a price cap of $25 for an emissions unit.
Geothermal power Station, near Taupo New Zealand
In 2009, the incoming Government made some amendments to the ETS, in recognition of the effects of the global financial crisis. It reduced the requirement to surrender emission units to one unit for every two tonnes of GHG emitted. It delayed indefinitely the planned phase-out of the free allocation of units to energy-intensive, trade-exposed industries.