Government announces ETS settings and regulations decisions

Announcement Climate change

The Government has decided to maintain Emissions Trading Scheme (ETS) settings largely as they are for the next five years.

Decisions were announced by Climate Change Minister Simon Watts following a four-week consultation on settings and regulations proposals.

Image showing Dunedin harbour with a road in the foreground, the city, the harbour and houses in a hill in the background.

Key points 

  • ETS auction volumes for 2027 to 2030 stay the same, and 1.1 million NZUs will be offered in 2031.  A total of 12.8 million units will be available over the 2027-2031 period. This is slightly lower than the volumes recommended during consultation because of updated industrial allocation forecasts and a small, ongoing surplus reduction, based on consultation feedback. 
  • Existing price controls such as the auction price floor are extended to 2031 instead of just 2030, with adjustments for inflation.   
  • The second emissions budget ETS cap will be adjusted to 81.9 Mt CO2e with the provisional third emissions budget ETS cap adjusted to 24.8 Mt CO2e.  
  • The annual settings process will remain, based on feedback from consultation and the Climate Change Commission which emphasised the importance of a responsive ETS settings process. The proposed biennial settings change will be taken out of the Climate Change Response Amendment Bill as it progresses.  

See a full breakdown of the unit limits and price controls for the 2027-2031 period(opens in new tab).

About the ETS 

The ETS is the Government’s key policy tool for reducing emissions. It influences businesses and industries to reduce their emissions through long-term investment in low emissions technology. 

Settings and regulations updates are a regular process that helps ensure the ETS aligns to our domestic emissions reduction targets. 

Alignment with Climate Change Commission advice 

The Commission provides independent advice to the Government as part of the settings process.  

The Government's decisions are largely aligned with the Commission’s recommendations this year. However, auction volumes for 2031 are lower than the Commission’s. This reflects a more conservative approach to meeting the third emissions budget, which covers 2031-35. 

ETS regulatory updates 

The Government has also directed ETS regulation proposals consulted on will be put in place with the exception of the update to the DEF for waste participants. 

See more details on the updates to ETS regulations(opens in new tab)

Next steps 

Changes to ETS settings and regulations will take effect from 1 January 2027.