This page has information about allocation of New Zealand Units to reduce impacts of the New Zealand Emissions Trading Scheme.
The Government provides financial assistance to reduce the impact of the New Zealand Emissions Trading Scheme (NZ ETS) on some sectors by providing them with New Zealand Units (NZUs). This allocation of NZUs either compensates for the loss of asset value resulting from the NZ ETS, or mitigates the NZ ETS-related cost increases faced by eligible businesses while they adjust to emissions pricing.
There are three main groups who are eligible for allocation:
- firms whose activities are emissions intensive and who are exposed to international trade
Allocation is made according to eligibility criteria for each sector. Businesses that can pass on the costs of the NZ ETS to their customers, for example fuel and electricity companies, will not be allocated any NZUs.
Those who receive allocated NZUs can use them to meet any NZ ETS obligations they may have. Allocated NZUs can also be sold or traded, which will help establish a market for the units.
Allocation is being provided to certain industrial activities to protect their competitiveness against producers that do not face equivalent costs for emissions. (For example their position could be weakened because if they passed the cost on to consumers to cover the impacts of the NZ ETS, a competitor could import a similar product at lower cost.)
An 'activity' is the chemical or physical transformation of a set of inputs into a given set of outputs. There are two tests that activities must pass before they are considered eligible for allocation: a trade exposure test and an emissions intensity test based on the tonnes of emissions produced for every $1 million of revenue. The minimum threshold for eligibility is 800 tonnes of CO2 equivalent per $1m of revenue.
See Industrial allocation: NZUs for industry for more information.
Fishing quota owners were given some NZUs in a one-off allocation in 2010 to compensate for the effect of increased fuel costs from the NZ ETS on the value of quota. People or organisations that were listed as holding quota on the quota register on 24 September 2009 can apply for an allocation of NZUs. A legislated formula sets out how many NZUs will be allocated to each eligible quota owner.
Allocation is being provided as compensation to owners of pre-1990 forests for the impacts on land values of the NZ ETS. This is because they face obligations under the NZ ETS if the land use is changed from forestry. Forest owners are able to voluntarily enter the scheme and receive credits of NZUs for forests planted after 1989 because trees absorb carbon and reduce New Zealand's international obligations.