Under the Emissions Trading Scheme (ETS), businesses have to buy carbon credits that allow them to produce greenhouse gases, which is meant to motivate them to reduce their emissions.
But certain businesses get free carbon credits. They’re businesses deemed to be ‘Emissions Intensive and Trade Exposed’ (that they have significant emissions, but would face a competitive disadvantage if they had to pay for their emissions while similar industries in other countries wouldn’t). Also known as preventing ’emissions leakage’.
In 2021, free carbon credits made up 6.6 million of a total 33 million units in the emissions cap (20% of credits surrendered by polluters that year were given to them by the government for free).
Just four businesses received 75% of these free credits:
- NZ Steel (owned by Bluescope)
- Ballance – a fertiliser company
- Methanex – a fossil fuel company exporting methanol, and
- NZ Aluminium Smelters (owned by Rio Tinto) – making aluminium for export.
These four businesses are responsible for 7.45% of NZ’s gross emissions.
Even if agriculture was to enter the ETS from 2025, it would also receive free credits to cover 95% of its emissions.
That’s why a coalition of environment groups (including Common Grace Aotearoa, Parents for Climate Aotearoa and Oxfam Aotearoa) is supporting a campaign to end carbon credits.