Compliance and infringements in the New Zealand Emissions Trading Scheme

The Climate Change Response (Emission Trading Reform) Amendment Act (the Act) has been passed into law. It makes a number of changes to the New Zealand Emissions Trading Scheme (NZ ETS). Read about changes related to compliance.

Improving rates of compliance within the NZ ETS

The penalties in the NZ ETS have been strengthened and redesigned to increase rates of compliance and increase efficiency.

Surrender/ repayment penalty

An automatic surrender/repayment penalty will apply when participants have failed to surrender or repay units by the due date. Each overdue unit will incur a cash penalty of three times the current market price. 

The automatic surrender/repayment penalty will not apply to small foresters until 1/1/2023. In the meantime they will be subject to the existing penalties in the Climate Change Response Act.

Reporting penalty

A reporting penalty will apply where the enforcement agency has needed to make an amendment to an emissions return or an assessment of a person’s emissions. The penalty will be behaviour-based with up to a 100 per cent market price penalty where the participant has knowingly reported their emissions incorrectly.

These penalties will apply in addition to ‘making good’ on the underlying obligation.

Introduction of low-level infringement offences

The Act includes infringement offences to deter low-level non-compliance with the rules of the NZ ETS and the Synthetic Greenhouse Gas levy. 

These strict liability offences will result in financial sanctions but not convictions for offenders. Prosecutions will still be available for the most serious cases of offending. This will improve compliance outcomes while minimising administrative costs.