Market governance of the New Zealand Emissions Trading Scheme
The Government is working on proposals to improve the market governance of the New Zealand Emissions Trading Scheme’s (ETS) secondary market (NZU market).
Most of New Zealand’s biggest emitters must buy or 'surrender' one 'emission unit' – known as a New Zealand Unit (NZU) – to the government for every tonne of carbon they emit.
NZUs can be bought and sold on a secondary market, where units can be traded via trading platforms or directly between buyers and sellers.
Limited market information about NZUs
There is no information available about over the counter (OTC) trades (NZU trades which take place directly between two parties, without an intermediary such as a broker), and there is limited transparency about platform trading.
Limited monitoring
There is no dedicated monitor for trading activity, making it challenging to detect market misconduct and suspicious activity.
Market conduct obligations
The regulatory framework for NZUs is unclear and not well suited to address market risks. The Climate Change Response Act establishes the ETS and provides its legal framework but does not have provisions regulating market conduct.
The Ministry is currently considering how to best address these issues. The Government is expected to make decisions on improvements to ETS market governance later in 2024.
For inquiries or further information, please contact ETSfeedback@mfe.govt.nz.