Box 14 New Zealands Cap And Trade Scheme

Participants are required to hold one NZU (equal to an AAU) or a Kyoto unit2 to cover each metric tonne of CO2e emitted within the compliance period. Allowing international trading means scheme participants can buy or sell emission units without causing a significant movement in their price.

Integration with global carbon markets also means that emission prices in New Zealand align with international prices. This, in turn, helps to ensure that the level of price exposure in the New Zealand economy is not too far ahead of, or too far behind, prices determined by international efforts to reduce greenhouse gas emissions.

The support of the Kyoto Protocol mechanisms such as the Clean Development Mechanism, a tool for reducing greenhouse gas emissions and assisting sustainable development in developing countries, gives New Zealand businesses access to least-cost ways to reduce emissions overseas. This has the effect of limiting the cost to companies of reducing emissions.

The Ministry of Economic Development administers the emissions trading and the electronic New Zealand Emissions Unit Register which records:

• the holders of emission units and the amount of emission units held;

• transfers of emission units between holders;

• the surrender of emission units by participants in order to meet their obligations under the emissions trading scheme (Ministry for the Environment, 2008).

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