NZ ETS unit settings and annual regulatory updates 2026

Proposal summary

• Default emissions factors (DEFs) allow emitters to convert data about their operations (such as how much natural gas they mine, and its chemical composition) into emissions totals, so that they can report under the Emissions Trading Scheme (ETS).
• We propose to use the latest Environmental Protection Authority data to calculate new DEFs for use in the 2027 emissions reporting period. This will ensure that the reporting remains accurate.

Impacts

• This proposal mainly affects businesses that buy natural gas in large quantities and opt into the ETS for these emissions, and that may pass on the change in their emissions costs to the consumer.
• The change should result in a decrease in emissions costs, on average, for those who use DEFs.
• There are generally negligible broader economic implications (ie, the changes do not meaningfully influence the cost of living).

The prescribed DEFs for natural gas fields need regular updating due to changes in the composition of mined natural gas over time, and for the opening of new fields.

To calculate their emissions, natural gas miners, along with gas-purchasing (opt-in) ETS participants who buy more than two petajoules of natural gas in a year, use the methodologies and emissions factors in the Climate Change (Stationary Energy and Industrial Processes) Regulations 2009 (SEIP Regulations).

Gas miners must run tests on their gas to calculate emissions specific to their field, and report this data in their emissions returns. Their ETS obligation is based directly on their total emissions (as opposed to estimated, using a DEF). The emissions data from gas miners is used to set the table of DEFs in table 10, Schedule 2 of the SEIP Regulations.

The DEFs are available for opt-in participants to calculate their ETS obligations. Unlike gas miners, opt-in participants are not required to perform the same tests on the gas they purchase.

The SEIP Regulations also provide for a national average DEF in section 50(7).

This is used to estimate emissions associated with the storage and purchase of natural gas. Once stored, quantities extracted from storage cannot be associated back to a specific natural gas field, creating the need for a national average DEF.

Proposal

We propose to update the DEFs for natural gas activities in table 10, Schedule 2 of the SEIP Regulations, to reflect the most recent data. Table 3 shows the existing and proposed DEF values.

Table 3: Existing and proposed default emissions factors (DEFs) for natural gas activities¹

Note: In table 3, the DEFs for Kupe, McKee, Mangahewa and Maui are not the same as those printed in the current SEIP Regulations. The table lists the corrected figures that will be published in the SEIP Regulations by the end of September 2026 and apply to the 2026 calendar year emissions reported in 2027. We notified affected parties earlier this year.

¹ tCO₂e/TJ = tonnes carbon dioxide equivalent per terajoule.

Impacts

This proposal will affect opt-in participants who use the DEFs to the degree indicated by the percentage change in table 3. We do not expect it to have broad economic impacts.

Implementation

The proposed DEFs will apply to activities that take place in the 2027 calendar year, reported in 2028.

Proposal summary

• Default emissions factors (DEFs) allow emitters to convert data about their operations (such as how much geothermal fluid they extract, and its chemical composition) into emissions totals, so that they can report under the Emissions Trading Scheme.
• We propose to use the latest Environmental Protection Authority data to calculate new DEFs for use in the 2027 emissions reporting period. This will ensure that the reporting remains accurate.

Impacts

• This proposal mainly affects businesses that operate geothermal power plants and that may pass on the change in their emissions costs to the consumer.
• The change should result in a decrease in emissions costs, on average, for those who use DEFs.
• There are generally negligible broader economic implications (ie, the changes do not meaningfully influence the cost of living).

The DEFs for geothermal activities require updating annually to:

• include new geothermal plants that have begun operation since the previous update to regulations
• account for changes in the concentration of greenhouse gases in extracted geothermal fluid
• reflect any changes in how existing plants operate, which may affect their emissions.

Geothermal electricity generation involves extracting geothermal fluid from a reservoir. The typical composition of the fluid includes brine and several greenhouse gases. These gases can be emitted as part of the electricity generation process, reducing the gas content of the reservoir over time and therefore changing the composition of the fluid.

Many geothermal participants apply for and use unique emissions factors (UEFs) because they are reinjecting at least part of the fluid back into the reservoirs. This process significantly reduces emissions from geothermal activities.

The DEFs for geothermal activities are set out in table 6 of Schedule 2 in the SEIP Regulations.

Last year, we calculated the DEFs using a new methodology that we consulted on in 2025² . In this approach, DEFs are recalculated annually using a rolling average of UEFs, or the DEF where there is no UEF, across the previous three years. This makes using the DEF a more viable option for participants because it more accurately reflects their emissions. It also reduces costs and administration for both the Government and participants.

^{2 Proposed changes to the New Zealand Emissions Trading Scheme regulations 2025 (PDF 677KB).}

Proposal

We propose to update the DEFs for geothermal activities in table 6, Schedule 2 of the SEIP Regulations, to reflect the most recent data. Table 4 shows the existing and proposed DEF values.

Table 4: Existing and proposed default emissions factors (DEFs) for geothermal activities³

^{3 tCO}₂^{e/t = tonnes carbon dioxide equivalent per tonne.}

Note: In table 4, the DEFs for Kawerau KA24, Mokai I and II, Nga Awa Purua, Ngāwhā I and II, Ohaaki, Tauhara, Te Huka III, Te Mihi and Wairakei Station Site are not the same as the DEFs printed in the SEIP Regulations. The table lists the corrected figures that will be published in the SEIP Regulations by the end of September 2026 and apply to the 2026 calendar year emissions reported in 2027. We notified affected parties earlier this year.

Impacts

This proposal will affect geothermal participants who use the DEFs, to the degree indicated by the percentage change in table 4. We do not expect this proposal to have broad economic impacts.

Implementation

The proposed DEFs will apply to activities that take place in the 2027 calendar year, reported in 2028.

We are seeking information and feedback on the geothermal DEF table
We are taking this opportunity to outline the Ministry for the Environment’s (the Ministry’s) approach to incorporating new plants into the geothermal activities DEF table and three-year rolling average methodology for calculating new DEFs.

When a new plant opens, it will not have the three years of data that the geothermal DEF rolling-average methodology requires. Therefore, in their first emissions return, new plants are required to use the ‘any other plant’ DEF from table 6, Schedule 2 of the SEIP Regulations, or they may use a UEF if they have obtained one.

If businesses contact the Environmental Protection Authority ahead of a new plant opening, the Ministry can plan to publish the new plant in the next annual update of the geothermal DEF table. This way, the plant will have its own DEF before it has to submit an emissions return. Alternatively, the plant will be added to table 6 of Schedule 2 in time for its second emissions return.

When a new plant is added to the regulations, its DEF will be the same as that for ‘any other plant’, and therefore will not accurately reflect the new plant’s emissions. Over time, accuracy improves as approved UEFs for the plant are incorporated into the rolling-average methodology.

We have also identified inconsistencies in how plants are named in table 6 of the SEIP Regulations. In some cases, the class name in the regulations does not align with the location for which participants apply for UEFs. Plant names were originally taken from consultant reports. 

We are seeking feedback from businesses on the preferred naming convention for each plant in table 6 of Schedule 2 (such as location and business name).

Proposal summary

• Default emissions factors (DEFs) allow emitters to convert data about their operations (such as how much they import of different fuel types, and their chemical composition) into emissions totals, so that they can report under the Emissions Trading Scheme.
• Our proposal is to use the latest Ministry of Business, Innovation and Employment data to calculate new DEFs for use in the 2027 emissions reporting period. This will ensure that the reporting remains accurate.

Impacts

• This proposal mainly affects businesses that import liquid fossil fuels and consumers, where the change in emissions cost is passed on by businesses.
• The change should result in a decrease in emissions costs, on average, for those who use DEFs.
• There are generally negligible broader economic implications (ie, the changes do not meaningfully influence the cost of living).

The DEFs for liquid fossil fuels are listed in the Schedule of the Climate Change (Liquid Fossil Fuels) Regulations 2008 (LFF Regulations). Since the establishment of the ETS, the DEFs for liquid fossil fuels have been regularly reviewed to ensure they accurately represent the average quality⁴ of fuel consumed in New Zealand.

Since the closure of the Marsden Point Oil Refinery, all liquid fossil fuel consumed in New Zealand has been imported. DEFs are now adjusted to solely reflect imported fuel quality, using the most recent data.

^{4 This is based on data from the Ministry of Business, Innovation and Employment.}

Proposal

We propose to update the Schedule of DEFs for each category of fuel in the LFF Regulations using the latest data on imported fuel quality. Table 5 shows the existing and proposed DEF values.

Table 5: Existing and proposed default emissions factors (DEFs) for liquid fossil fuel categories⁵

^5 tCO₂^{e/kl = tonnes carbon dioxide equivalent per kilolitre.}

Impacts

This proposal will have minor impacts on participants who use the DEFs, as indicated by the percentage change in table 5. We do not expect this change to meaningfully influence the cost of living.

Implementation

The proposed DEFs will apply to activities that take place in the 2027 calendar years, reported in 2028.