Political construction of carbon pricing: Experience from New Zealand emissions trading scheme Article uri icon


  • Emissions Trading Systems (ETS) are the political scheme that most of the industrial world adopted to control GHG emissions. Currently, many jurisdictions are implementing ETS, and countries where they already enforced are improving their schemes. This paper examines the political construction of the New Zealand Emissions Trading Scheme (NZ ETS) using official policy documentation and analysis from the New Zealand government and domestic researchers. New Zealand has the second oldest ETS in the world. The NZ ETS is quite distinctive because it covers the largest number of activity sectors. The points of obligation are based on an upstream selection, and there is no cap on emissions at a national scale. Three key features are explored. The NZ ETS is the result of a long and democratic process that involved the participation of different sectors. Secondly, the NZ ETS deals with the transition to a low emissions economy by managing free allocation. Thirdly, it is hard to meet the theoretical functional goals of the ETS in reality. Setting a cap on emissions is the milestone to guaranteeing environmental efficiency, but the NZ ETS has failed in this regard so far. The weak incentive effect of the low price and the generous allocation scheme affected the environmental efficiency of the NZ ETS. Countries with new or forthcoming ETS would be well advised to consider these factors when implementing their schemes. © 2022

publication date

  • 2022-01-01