Have your say on options to reduce emissions from organic waste - Section 4. Broadening waste sector participation in the New Zealand Emissions Trading Scheme - Ministry for the Environment

Section 4. Broadening waste sector participation in the New Zealand Emissions Trading Scheme

There are 3 questions that can be answered within Section 4.

You can read this section and the questions either:

in the sector feedback document (PDF 1.7MB)
or as HTML below.

Section 4 is one of the sections under Part B, which focuses on improvements to landfill gas management.

Context Context

The New Zealand Emissions Trading Scheme (ETS) is a key tool for New Zealand to meet domestic and international climate change targets. The ETS is designed to provide economy-wide coverage, with all sectors of the economy besides agriculture paying for their emissions through emission unit surrender obligations.

Trends in waste disposal suggest one impact of the ETS on the landfill sector to date has been to incentivise disposal at larger regional landfills over smaller (usually council-owned) landfills. Larger regional landfills are likely to be more capable of managing emissions, so this behaviour can help reduce emissions from waste.

Significant capital cost is associated with retrofitting emissions reduction systems. Moreover, retrofitted systems are generally not able to achieve the same efficiency rates as those at larger sites.⁴⁶

In their contributions to informal engagement to date, some landfill operators considered the ETS provided a meaningful incentive to invest in landfill gas capture. This is reflected in unique emissions factor (UEF) applications by those operators, which show higher efficiency landfill gas capture systems in operation. Informal advisory group stakeholders recommended considering extending ETS obligations to Class 2 landfills and resource recovery facilities that produce biogenic methane.

^{46 Eunomia. 2025. Landfill Gas Management – Final report. Prepared for the Ministry for the Environment by Eunomia. Wellington: Ministry for the Environment.}

Unique emissions factors and the waste sector

The Climate Change (Unique Emissions Factors) Regulations 2009 provide for UEFs. UEFs offer an alternative for ETS participants that consider the default emissions factors available for their sector do not apply to them. Both default and unique emissions factors are used to calculate ETS obligations by applying an emissions volume to the activity undertaken. For waste, each tonne of waste disposed of is multiplied by the emissions factor to estimate overall emissions.

Waste sector participants can apply for a UEF if they have evidence that their waste composition differs from the national average, or if they collect and destroy landfill gas (including methane). Using a UEF will usually mean the emissions total is lower. Participants make their application to the Environmental Protection Authority, which includes a statement verifying the accuracy of the submission.

The Government is currently consulting on changes to the way UEFs are calculated for the waste sector. You can find more information on these changes in the 2026 ETS regulatory review.

The issues

Given most classes of disposal facilities and all types of resource recovery facilities are currently excluded from the ETS, coverage of biogenic methane emissions from the waste sector is incomplete. That is, although the system covers the sector, it does not cover all entities and activities within the sector that produce emissions. This can lead to a risk of sectoral emissions leakage – where a reduction in emissions from one activity (because it is included in the ETS) results in an offsetting increase in a related activity. For the waste sector, this could look like disposal of waste shifting from Class 1 landfills covered by the ETS to other classes of landfill that are not covered.

Waste disposal levy reporting shows that waste volumes going to Class 2 landfills are increasing, while Class 1 volumes are decreasing. Disposal facility operators have provided anecdotal evidence indicating that this may be because disposing of materials at Class 1 landfills is more expensive than at Class 2 landfills. The ETS is not the only contributor to a higher cost of disposal at Class 1 facilities, however. Class 1 landfills are also subject to higher waste disposal levy rates, and likely also higher gate fees (the cost paid by site customers), to reflect costs associated with meeting resource management controls (eg, requirements for site design and operation, and environmental monitoring).

There are three regulated categories of prescribed disposal facility and three ‘other facility’ types⁴⁷ (table 1). Table 1 does not include facility types without a regulated definition, such as waste-to-energy facilities.⁴⁸

Table 1: Waste and resource recovery facility types and their regulated financial obligations to manage environmental harm

Facility type	Regulatory definition	Waste levy obligations⁴⁹	ETS obligations
Class 1: Municipal disposal facility	Accepts any of the following: household waste waste from commercial and industrial sources waste from institutional sources (eg, medical waste) green waste waste that is not accepted at the other types of landfills listed below.	$65 per tonne to 30 June 2026 $70 per tonne from 1 July 2026 to 30 June 2027 $75 per tonne from 1 July 2027	An annual emissions return that records total lifetime emissions from waste disposed in the year, based on tonnages, with emissions paid for by purchasing and surrendering emission units (current market price is around $50 each)
Class 2: Construction and demolition fill disposal facility	Accepts waste from construction and demolition activities Does not accept Class 1 waste (as above)	$35 per tonne to 30 June 2026 $40 per tonne from 1 July 2026 to 30 June 2027 $45 per tonne from 1 July 2027	None
Class 3 and 4: Managed or controlled fill disposal facilities	Accepts any of the following: inert waste material from construction and demolition activities inert waste material from earthworks or site remediation Does not accept Class 1 or 2 waste (as above)	$15 per tonne to 30 June 2026 $15 per tonne from 1 July 2026 to 30 June 2027 $20 per tonne from 1 July 2027	None
Class 5: Cleanfill facility	Accepts only virgin excavated natural material (eg, clay, soil or rock) for disposal Does not accept Class 1, 2, 3 or 4 waste (as above) Does not accept hardfills (eg, concrete, brick, asphalt, pavers, tiles or ceramics)	Information requirements only	None
Industrial monofill	Accepts waste that: discharges or could discharge contaminants or emissions is generated from a single industrial process (eg, steel- or aluminium-making, or pulp- and paper-making) carried out in one or more locations	Information requirements only	None
Resource recovery facility	A facility that: collects, sorts or processes material, or extracts materials or energy from material (or carries out any combination of those activities) for the purpose of recovering components for recycling or reuse is not a disposal facility does not incinerate waste (with or without energy recovery) Includes facilities focused on a single waste stream (eg, a construction and demolition resource recovery facility or materials recovery facility)	None (some information requirements apply to resource recovery facilities wholly or partly owned by territorial authorities)	None
Transfer station⁵⁰	A facility: that contains a designated receiving area for waste from which waste or any material derived from that waste is transferred to a final disposal site or transferred elsewhere for further processing that does not itself provide long-term storage for waste or any material derived from that waste	Information requirements only	None

For more information on the types of material that these facilities can accept, see Ministry for the Environment (Ministry) guidance.⁵¹ In addition, Waste Management Institute New Zealand (WasteMINZ) has provided waste acceptance criteria for each class of disposal facility.⁵²

^{47 Waste Minimisation (Calculation and Payment of Waste Disposal Levy) Regulations 2009, reg 3B.}

^{48 As per Schedule 2 (Levy rate) of the Waste Minimisation (Calculation and Payment of Waste Disposal Levy) Regulations 2009 for Class 1–4 facilities, and Part 1 (Records required from operators) of the Waste Minimisation (Information Requirements) Regulations 2021 for the remaining facilities.}

^{49 As per Schedule 2 (Levy rate) of the Waste Minimisation (Calculation and Payment of Waste Disposal Levy) Regulations 2009 for Class 1–4 facilities, and Part 1 (Records required from operators) of the Waste Minimisation (Information Requirements) Regulations 2021 for the remaining facilities.}

50 As per Regulation 3 of the Waste Minimisation (Information Requirements) Regulations 2021.

51 Ministry for the Environment. 2025. Waste levy – Determining your disposal facility class (PDF 241KB). INFO 1306. Wellington: Ministry for the Environment.

52 WasteMINZ. 2023. Technical Guidelines for Disposal to Land (PDF 3.1MB). Auckland: WasteMINZ.

Read about the options we are seeking feedback on - HTML format

Options we are seeking feedback on Options we are seeking feedback on

The Ministry is seeking views on the scope of the waste sector’s participation in the ETS. Expanding the coverage of the ETS would increase coverage of biogenic methane emissions in the scheme and extend the incentive to reduce these emissions. This approach would see additional landfills facing ETS obligations, increasing the cost to the sector.

We have identified three key principles for determining the capacity of different waste sector activities to participate in the ETS (table 2).

Table 2: Proposed principles for determining the appropriateness of ETS coverage for the waste sector

Principle	Definition
1. Willingness to pay (WTP)	The ETS provides two pathways for waste participants to account for their emissions – that is, by either: paying for New Zealand Units (NZUs) (one unit per tonne of carbon dioxide equivalent) investing in abating behaviours or infrastructure, or avoiding through diversion. Willingness to pay is a concept from behavioural economics, representing the maximum price a participant is willing to pay to reduce emissions. This will in turn be influenced by consumer WTP – for example, for increased waste disposal costs. This principle helps to identify whether a market-based mechanism is the most appropriate solution for addressing emissions, or whether a more regulatory approach is required (due to a low WTP).
2. Likely scale of emissions	The focus of this work programme is on delivering emissions abatement towards sector targets set by the second emissions reduction plan (ERP2). For the ETS to act as a meaningful incentive, the NZU price must be high enough to influence behaviour change. If emissions are negligible, it is unlikely to do so. Any new participants in the ETS should be producing an estimable and material volume of methane to justify coverage.
3. Options for avoidance	To be effective, market-based mechanisms rely on operators being able to choose how to respond, with the assumption that they will make decisions that best enable their business or service to continue while complying with ETS obligations. As well as WTP either for NZUs or abating activities, for a new participant to be considered for coverage, tangible options for avoidance must be available. These could include change of business practice to reduce emissions (eg, declining organic waste), or investment in off-the-shelf or innovative technologies proven to address emissions. This differs from WTP because it refers to the opportunity to pay, rather than willingness. Operators should have options for how they reduce emissions, rather than simply being subject to ongoing ETS obligations with no choice but to pay, as avoidance options are not available.

Principle

Definition

1. Willingness to pay (WTP)

The ETS provides two pathways for waste participants to account for their emissions – that is, by either:

paying for New Zealand Units (NZUs) (one unit per tonne of carbon dioxide equivalent)

investing in abating behaviours or infrastructure, or avoiding through diversion.

Willingness to pay is a concept from behavioural economics, representing the maximum price a participant is willing to pay to reduce emissions. This will in turn be influenced by consumer WTP – for example, for increased waste disposal costs.

This principle helps to identify whether a market-based mechanism is the most appropriate solution for addressing emissions, or whether a more regulatory approach is required (due to a low WTP).

2. Likely scale of emissions

The focus of this work programme is on delivering emissions abatement towards sector targets set by the second emissions reduction plan (ERP2). For the ETS to act as a meaningful incentive, the NZU price must be high enough to influence behaviour change. If emissions are negligible, it is unlikely to do so. Any new participants in the ETS should be producing an estimable and material volume of methane to justify coverage.

3. Options for avoidance

To be effective, market-based mechanisms rely on operators being able to choose how to respond, with the assumption that they will make decisions that best enable their business or service to continue while complying with ETS obligations.

As well as WTP either for NZUs or abating activities, for a new participant to be considered for coverage, tangible options for avoidance must be available. These could include change of business practice to reduce emissions (eg, declining organic waste), or investment in off-the-shelf or innovative technologies proven to address emissions.

This differs from WTP because it refers to the opportunity to pay, rather than willingness. Operators should have options for how they reduce emissions, rather than simply being subject to ongoing ETS obligations with no choice but to pay, as avoidance options are not available.

Using the principles in table 2 as a guide, three types of facility may be worth considering for potential inclusion in the ETS.

Class 2 landfills. Surface detection studies have detected some methane at a subset of Class 2 landfills.⁵³ WasteMINZ guidelines⁵⁴ acknowledge that Class 2 facilities produce landfill gas and provide guidance on how to monitor this. A few key waste streams disposed of at Class 2 landfills, including timber, produce methane in landfill.
Industrial monofills handling organic and putrescible⁵⁵ materials. The Ministry considers that several industrial monofills are likely to produce methane, due to the materials that they handle and their disposal methodology. These monofills include those that handle sawmill materials and biosolids. Various minimisation opportunities are available for industrial monofills, depending on the waste stream they handle. For example, they could reuse organics as construction material, as well as using them to produce biofuel, animal bedding and mulch.⁵⁶
Resource recovery facilities handling organic and putrescible materials. In 2024, facilities that biologically treat organic waste, such as composting and anaerobic digestion facilities, accounted for 2.9 percent of waste sector emissions. This was a 7.3 percent increase from 2023 levels.⁵⁷ Other waste initiatives under ERP2 could increase the volume of organic waste taken to resource recovery facilities, meaning associated emissions could also increase. These facility types are expected to remain important for diversion. They may also expand over time as technology develops, including in response to the Government Statement on Biogas,⁵⁸ which supports biogas production from organic waste where appropriate.

Waste-to-energy facilities are excluded from the definition of ‘disposal’ in the Waste Minimisation Act 2008 and, at the time of publication, there are no large-scale waste-to-energy incineration plants operating in New Zealand. We could consider developing a regulatory definition for these facilities to future-proof the ETS to cover these sites if they are established.

Expanding participation would mean that additional landfills and other types of facilities would face ETS obligations, increasing the overall cost of reducing emissions for the sector. This would bring risks of increasing illegal dumping in response to higher gate fees, which would need to be addressed as these incidents cause environmental and aesthetic harm and place cost and compliance burdens on councils, landowners and the public. Although some increased costs can be expected if this option is progressed, in the current system only some types of facilities must account for their emissions during business, while others are able to consider emissions as an unpriced externality.

At this stage, we are seeking insights and additional evidence that could help inform further policy development.

Any subsequent changes to sector coverage in the ETS would require changes to both the Climate Change (Waste) Regulations 2010 and the Climate Change Response Act 2002, which defines disposal facilities for the purpose of ETS participation.⁵⁹ This definition was not updated when the current landfill classification system was introduced in 2021, so there is a disconnect between these definitions.

Future changes could also be required to the Climate Change (Unique Emissions Factor) Regulations 2009 and Climate Change (Waste) Regulations 2010 to provide emissions factors for different types of activities. Any future legislative changes would be subject to regulatory public consultation processes.

^{53 Pattle Delamore Partners Ltd. Unpublished. Class 2 Landfill Gas Capture Feasibility Study. Prepared for the Ministry for the Environment.}

^{54 WasteMINZ. 2023. Technical Guidelines for Disposal to Land (PDF 3.1MB). Auckland: WasteMINZ.}

^{55 The volume-to-weight conversion factors in Schedule 2 of the Waste Minimisation (Information Requirements) Regulations 2021 refer to putrescible waste as grass, leaves, foliage, branches, and food waste, not including soil or logs.}

^{56 Ministry for the Environment. 2019. Reducing waste: a more effective landfill levy – Consultation document (PDF 2.5MB). Wellington: Ministry for the Environment. Appendix E.}

⁵⁷^{Ministry for the Environment. 2026. New Zealand’s Greenhouse Gas Inventory 1990–2024 (Volume 1) (PDF 9.2MB). Wellington: Ministry for the Environment. p350.}

^{58 Ministry of Business, Innovation & Employment. 2025. Government Statement on Biogas (PDF 796KB). Wellington: Ministry of Business, Innovation & Employment.}

^{59 Climate Change Response Act 2002, s 4.}

4.1. Decision-making criteria on waste sector coverage for the ETS

4.1a. Are the principles identified (in table 2) appropriate for guiding decision-making on waste sector coverage for the ETS?

Yes No Maybe/unsure

4.1b. Please identify any relevant principles you consider are missing.

4.2. Waste sector participation in the ETS

4.2a. Are the current rules for participation in the ETS sufficient to cover all meaningful emissions sources in the waste sector?

Yes No Maybe/unsure

Please outline the reasons for your answer.

4.2b. Should all classes of disposal facility that accept putrescible and biodegradable waste be subject to ETS obligations for the emissions they produce?

Yes No Maybe/unsure

Please outline the reasons for your answer.

4.2c. Should resource recovery facilities that handle organic materials be subject to ETS obligations for the emissions they produce?

Yes No Maybe/unsure

Please outline the reasons for your answer.

4.2d. Should ETS obligations cover any other facility or infrastructure types in the waste and resource recovery sector that produce emissions?

Yes No Maybe/unsure

Please outline the reasons for your answer. If yes, please list any other facility or infrastructure types that should be covered by ETS obligations.

4.3. General questions

4.3a. Do you believe any other changes (beyond those included in this sector feedback document or the 2026 ETS regulatory review consultation) could be made to the ETS regulations for the waste sector to maximise emissions abatement opportunity and incentives?

Yes No Maybe/unsure

If yes, what other changes could be made to the ETS regulations for the waste sector?

4.3b. Please share any research, reports, data sets or other evidence relevant to emissions impacts, abatement opportunities or other topics that you believe should be considered when designing any changes to ETS coverage for the waste sector.

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