NZ ETS unit settings and annual regulatory updates 2025

Closes 29 Jun 2025

Calculating and reporting emissions

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Calculating and reporting emissions

The NZ ETS was designed to include as many emission sources as possible.1 People who perform any of the activities in Schedule 3 of the CCRA are ‘mandatory participants’. Individuals or businesses must meet certain thresholds to be classified as mandatory participants, which helps to balance the objectives of the legislation with administrative and compliance costs. Individuals or businesses can also opt in to the NZ ETS.

Participants in the NZ ETS must meet a range of obligations, including:

  • applying to open a holding account in the Register
  • registering as a participant
  • filing an emissions return at required intervals or in required circumstances: 
    • by the end of March annually, provided they have met any required thresholds,2 or by the end of June for post-1989 forestry participants3
    • when they de-register from the NZ ETS
    • when they submit returns to the Environmental Protection Authority (EPA) or, for forestry participants, the Ministry for Primary Industries 
  • surrendering units in accordance with required timeframes or receiving units.4

The objectives of the proposals in this section are to ensure the NZ ETS functions as intended so that the Government receives complete and accurate information about emissions.

1Ministry for the Environment and Treasury. 2007. The framework for a New Zealand Emissions Trading Scheme. Wellington: Ministry for the Environment and Treasury, p 41.

2 Thresholds are minimum levels of activity required before a participant is obligated to submit a return. They help avoid overly burdensome reporting expenses.

3 In New Zealand, the baseline date for greenhouse gas emissions is 1990. This means there are two categories of forest land in the NZ ETS: pre-1990 and post-1989. Post-1989 forestry participants must submit a final return in the year following the end of a mandatory emissions reporting period. They also have the option of submitting a provisional return in other years. Pre-1990 forestry participants must submit returns if they deforest their land.

4 Environmental Protection Authority. Compliance in the ETS. Retrieved 5 May 2025.

Amend reporting requirements for destroyed landfill gas

Gas produced by landfills is often destroyed before being emitted, for example, by capturing and burning it. To date, national estimates of gas that is destroyed by New Zealand’s landfills have been based on incomplete voluntary reporting, combined with data from infrequent applications for unique emissions factors. This has created an information gap for the greenhouse gas inventory and NZ ETS policy development.

The problem: Through voluntary surveys, the Government receives incomplete and unreliable information about landfill gas destroyed by individual landfills. This makes it difficult to assess optimal regulatory settings in the NZ ETS and increases uncertainty in landfill emissions estimates in the greenhouse gas inventory.

Proposal: Provide regulations to require operators that hold a landfill gas collection and destruction unique emissions factor (UEF) to report on the landfill gas quantity they have destroyed in the year. Table 2 outlines the options for implementing this change.

Table 2: Options for amending reporting requirements for landfill gas destroyed

Option Description  Assumed impact 
No change No requirements to provide this information. Requests may be sent to NZ ETS participants from the agency preparing the greenhouse gas inventory report.  Government receives incomplete and unreliable information about landfill gas destroyed.
Option 1: Mandatory reporting  Provide regulations to require NZ ETS participants to provide information on quantity of landfill gas collected and conveyed to destruction equipment.

Likely to be similar in cost and efficiency to the existing approach, because it uses the same established system.

Increases accuracy of reporting to the greenhouse gas inventory. 

Provides evidence for further strengthening of policy on NZ ETS UEFs.

 

1. Which option do you prefer?
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Amend placement of the oxidation factor in the formula to calculate waste emissions

The default emissions factor (DEF) for disposing of waste is set in the Climate Change (Waste) Regulations 2010. It is periodically updated as New Zealand’s waste profile changes. Most waste participants also apply for a site-specific UEF for landfill gas capture and destruction. The requirements for calculating and applying this UEF are set out in regulations 23A to 23D of the Climate Change (Unique Emissions Factors) Regulations 2009 (UEF Regulations).

These requirements include using a prescribed oxidation factor of 10 per cent (regulation 23C(2)(e) of the UEF Regulations). This estimates the volume of emissions that pass through the landfill cap5 and are oxidised from methane into carbon dioxide.

The problem: The UEF Regulations as currently worded provide a method for calculating a UEF (regulation 23C), including modelling gross emissions (regulation 23C(2)), but they do not stipulate when the oxidation factor should be applied. 

This means that, when calculating a UEF, participants can apply the oxidation factor to all potential gross emissions, rather than just those that are net of any captured by the gas collection system. This misapplication would inflate landfill gas capture efficiency rates and lead to under-reported emissions.

Proposals: Table 3 outlines options for addressing this problem.

5 A landfill cap is a layer of clay or some other material that covers the landfill.

Table 3: Options for addressing use of oxidation factor in emissions calculations

Option Description  Assumed impact 
No change

The UEF Regulations do not specify when to use the oxidation factor in estimating total gross emissions in UEF calculations.

Risk remains of inflating landfill gas capture efficiency rates and of under-reporting emissions. 

Option 1: Clarify in regulations when to use the oxidation factor in emissions calculations 

Amend the UEF Regulations to specify the circumstances in which to use the oxidation factor.

This is a regulatory change. 

Aligns with Intergovernmental Panel for Climate Change guidelines.

Gives participants greater clarity and instruction, and reduces their potential for non compliance.

Reduces the risk of inflated landfill gas capture efficiency rates and under-reported emissions; a regulatory requirement is generally a stronger incentive than a guideline.

May require participants to reapply for UEFs for the 2025 year by 31 January 2026.

2. Which option do you prefer?
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Update Default Emissions Factors for natural gas activities

DEFs for natural gas classes are values set in table 10, Schedule 2 of the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009 (the SEIP Regulations). They are based on data from emissions returns and support NZ ETS obligations for natural gas participants and ‘opt-in participants’ (those who do not mine themselves but buy more than 2 petajoules of natural gas a year).6 A national average DEF is used to estimate emissions associated with the storage of natural gas.

DEFs in the Schedule 2 table need to be updated annually to reflect the composition of mined natural gas over time, and to account for the opening of new fields. This update has happened most years to maintain the accuracy of emissions reported under the NZ ETS.

The problem: If DEFs are not updated annually, opt-in participants have two options:

  • report their emissions using the most recent DEFs, which will become out of date over time. This would affect the quality of their data, and the emissions cost they face in terms of NZUs to surrender
  • request more detailed information themselves directly from operators of natural gas fields. This would improve the accuracy of their data but create a burden for them and the operators.

Proposal: Amend table 10, Schedule 2 of the SEIP Regulations to update the DEFs based on data from the 2025 emissions returns. Because these data are not yet available, this proposal does not set specific values. Following consultation, the DEF values will be made public through a Gazette notice by 30 September 2025.

6 Schedule 4, Part 4 of the CCRA.

3. Do you agree that this annual update to DEFs should occur?
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Update Default Emissions Factors for geothermal activities

Geothermal participants in the NZ ETS currently have individual DEFs that are calculated based on the gas composition of their geothermal reservoirs. These DEFs are set out in table 6 of Schedule 2 of the SEIP Regulations and require updating periodically (most recently in 2024) to:

  • include new geothermal participants who have begun operation since the previous update 
  • account for changes in the volume of greenhouse gases held in the geothermal reservoirs.

In addition to DEFs, many geothermal participants apply for and use UEFs. This is because they may be re-injecting at least part of the geothermal fluid back into the reservoirs, to reduce emissions, or otherwise have had a change in emissions since the DEFs were last updated. In 2024, the calculation methodology for UEFs in regulations 14 to 17 of the UEF Regulations were updated after consultation.

Most participants apply for a UEF each year, rather than using their DEF, because the UEF is more accurate, resulting in lower NZ ETS costs. Cabinet has previously agreed (following consultation in 2024) that, in the future, DEFs would be calculated based on a three-year rolling average of past UEF values where available (and the current DEF value set in regulation where not). This approach will reduce costs and administration for both the Government and participants because it removes the need for annual UEF applications unless a participant has a significant shift in their practices.

The problem: We intend to implement the rolling average approach to calculate DEFs, with changes to table 6 in Schedule 2 of the SEIP Regulations. An important decision is what date range to use for the first instance of this calculation. The date range decided will set the precedent for the calculation of DEFs in future years.

Proposal: We have two options for how we calculate the DEFs.

  • Option 1: Apply a rolling average based on the past three years of UEFs and current DEFs available at the time of this consultation. This means we can clearly show the proposed DEF values through consultation. The most recent UEF would be from the year prior to consultation, with the result that improvements in efficiency would take an additional year to be reflected in DEFs. For this year, that means setting 2026 DEFs based on data from 2022 to 2024. Table 4 outlines what the 2026 DEF values would be under option 1.
  • Option 2: Apply a rolling average based on the DEFs and UEFs from the year of this consultation and the two previous years. This approach would consist of more up-to-date DEFs and UEFs. Because this year’s UEFs will not be known until after consultation, we cannot provide a list of DEFs in the consultation material. For this year, option 2 would mean setting 2026 DEFs based on data from 2023 to 2025.

Table 4: Proposed 2026 geothermal DEF values using option 1 date range

Class – Geothermal fluid used by:  Type of value 2022    2023     2024 Proposed DEF value for 2026 (option 1)
Part A          
Kawerau II UEF 0.0152 0.0156 0.0143 0.015033
Kawerau Industrial  Current DEF 0.0174 0.0174 0.0174 0.0174
Kawerau KA24 UEF 0.0119 0.0119 0.0119 0.0119
Miraka Milk Current DEF 0.0053 0.0053 0.0053 0.0053
Mokai I and II UEF 0.00418 0.00382 0.00382 0.0039
Ngā Awa Purua UEF 0.0087 0.0087 0.0087 0.0087
Ngā Tamariki UEF 0.0073 0.0073 0.0069 0.0072
Ngāwhā I and II  UEF 0.0442 0 0 0.0147
Ngāwhā III UEF     0 0.0437
Current DEF 0.0655 0.0655  
Ohaaki UEF 0.0333 0.0333 0.0333 0.0333
Poihipi Road Current DEF 0.0051 0.0051 0.0051 0.0051
Rotokawa I UEF 0.0119 0.0119 0.0119 0.0119
Te Ahi o Maui UEF 0.0106 0.0113 0.0119 0.0113
Te Huka UEF 0.0073 0.00358 0.00061 0.0038
Te Mihi UEF 0.0044 0.0041 0.0045 0.0043
Topp 1 UEF 0.0102 0.0088 0.0088 0.0093
Wairakei Station site UEF 0.0022 0.0023 0.0022 0.0022
Tauhara UEF     0.0056 0.0237
Current DEF 0.0300 0.0300  
Any other plant or process using geothermal steam to produce electricity or industrial heat  Current DEF 0.0300 0.0300 0.0300 0.0300
Part B          
Mokai Greenhouse Current DEF 0 0 0 0
Tauhara Tenon  Current DEF 0 0 0 0
Any other plant or process using geothermal fluid to produce electricity or industrial heat through a process other than the production of geothermal steam  Current DEF 0.0009 0.0009 0.0009 0.0009

There is a trade-off between these two options. Option 1 provides more transparency, making clear what the next year’s DEF will be. Option 2 is more responsive, reacting faster to changes in participants’ UEFs. Table 5 summarises these two options and the assumed impact of each one.

Table 5: Options for calculating DEFs

Option Description  Assumed impact 

No change

DEFs are not updated and over time may become out of date.

Because DEFs are most likely to overestimate emissions, most NZ ETS participants continue to apply for UEFs annually, which is an additional cost to them.

Option 1: DEF averaging using data from 2022 to 2024 

Implement the 2024 decision to move to rolling three-yearly averages for DEFs.

Use the years 2022, 2023 and 2024 to determine the 2026 average.

This is a regulatory change. 

Is more transparent and provides certainty about the 2026 values to be set (information for the proposed averaging period is available now).

Will allow some geothermal participants to avoid applying for UEFs or have less frequent need to do so. Allows updating of DEFs at no extra cost to the regulator.

Reported emissions and associated NZ ETS costs are more consistent with actual emissions (but less so than option 2).

No notable cost to implement. 

Option 2: DEF averaging using data from 2023 to 2025 

Implement the 2024 decision to move to rolling three-yearly averages for DEFs.

Use the years 2023, 2024 and 2025 to determine the 2026 average.

This is a regulatory change.

More reflective of current practice, reflects the three years immediately prior to determine the following year’s average. 

Will allow some geothermal participants to avoid or reduce the need to secure UEFs as frequently. Allows updating of DEFs at no extra cost to the regulator.

Reported emissions and associated NZ ETS costs are more consistent with actual emissions.

No notable cost to implement.
 

4. Please rank the options in order of preference.
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Including carbon dioxide sold by natural gas mining

New Zealand has one domestic producer of carbon dioxide (CO2) for industry use: the Kapuni Gas Treatment Plant. The CO2 is produced from natural gas when it is processed. It is part of the gas miner’s NZ ETS reporting due to the miner measuring the mass fraction of carbon in the natural gas before it is processed.

The problem: If a natural gas miner measures the mass fraction of carbon in the gas after natural gas processing, then CO2 removed before that point would not be included in the miner’s emissions reporting. The existing natural gas miner is considering moving to this measurement point soon.

Proposal: We intend to change the NZ ETS regulations to ensure CO2 sold from natural gas processing is required to be included in emissions calculations if the mass fraction of carbon in natural gas is measured after natural gas processing. 

5. Do you agree that regulations should be changed to include CO2 sold from natural gas processing if the mass fraction of carbon in natural gas is measured after natural gas processing?