Skip to content

New Zealand Emissions Trading


The Kyoto Protocol has not created or bestowed any right, title or entitlements to emissions of any kind on [developed countries and economies in transition]

Marrakesh Accords1

I Introduction


The Climate Change Response Act 2002 (CCRA 2002) sets up an emissions trading scheme to reduce greenhouse gas emissions in New Zealand (NZETS).2 This is based on the international preferred option for mitigation as a market approach to environmental protection rather than any other form of environmental regulation. The objective of emissions trading is to limit emissions that are produced by putting a price on the emissions. The result is that those who do not emit or reverse the process of emissions are rewarded. As there is a limit on the level of emissions, the market rather than the government finds a price to put on the emissions. Trading, therefore, attempts to find those that are able to reduce emissions or reverse the process of emissions for the least cost. The nature of the thing that is traded has been variously described to include the words “permit”, “allowance”, “offset”, “unit”, “credit”, and “certificate”. For consistency, the term “emissions unit” is used throughout. As these synonyms make clear, an emissions unit is an amorphous creature even though it represents the avoidance of one tonne of carbon dioxide equivalent. Despite the politics, the New Zealand emissions unit (NZU) has remained. This chapter, therefore, analyses the legal nature of the NZU. With this theoretical basis, it becomes imperative to analyse how the NZU will function in practice under the NZETS to reduce greenhouse gases. This requires an examination of the emissions registry, holding accounts, participants, free allocation, transfer, offences, and fraud. How the NZU functions under other statutes will further expose the unique nature of this statutory created form of personal property.


II United Nations Framework Convention on Climate Change 1992 and the Kyoto Protocol 1998

After the IPCC issued its first report, the United Nations Framework Convention on Climate Change (UNFCCC) was negotiated and opened for signature in 1992. The objective of the Convention was to achieve international “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system3 .

This was to be “achieved in a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner4. Climate change was, thus, defined as “a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods5. The Convention is guided by several principles including intergenerational equity, common but differentiated responsibilities, the precautionary principle and sustainable development6.  In accordance with the principle of common but differentiated responsibilities, developing and developed countries have differing responsibilities7. The remaining provisions of the Convention are procedural. There is a requirement to record “national inventories of anthropogenic greenhouse gas emissions8. A Conference of the Parties (COP) is established with a Secretariat meeting annually9. and various subsidiary bodies are created. For instance, a financial mechanism is created to fund projects to address climate change especially in vulnerable developing countries10. A central part of the Convention anticipates that the COP may “adopt protocols to the Convention11.

In 1997 at Kyoto, Japan, an agreement for legally binding targets for emissions reductions was fortified with the Kyoto Protocol. Negotiations were complex and compromises were made. In 2001, the United States made it clear that it would not ratify the Protocol. However, after Russia ratified the Protocol the Protocol entered into force in 2005. The main operative provision is Article 3(1) which provides12.

[Developed countries] shall, individually or jointly, ensure that their aggregate anthropogenic carbon dioxide equivalent emissions of greenhouse gases… do not exceed their assigned amounts, calculated pursuant to their quantified emission limitation and reduction commitments… with a view to reducing overall emissions of such gases by at least 5 per cent below 1990 levels in the commitment period 2008 to 2012.

The references to “assigned amounts” and “qualified emission limitation or reduction commitments” refer to the commitment to reduce greenhouse gases that each developed country negotiated and that was set in the Kyoto Protocol13. . This is calculated as against a percentage of the base year of 1990. For example, New Zealand has to meet its commitment of 100 per cent its 1990 levels in the first commitment period from 2008 to 2012.14

In order to achieve reductions in greenhouse gas emissions given that climate change is a global problem and reductions can be made anywhere, a number of “flexibility mechanisms” were created in the Protocol based on a market-orientated approach to mitigation.15 This market-orientated approach had been used for ozone depleting substances16 and acid rain in the United States.17 Nonetheless, other forms of environmental regulation have been proffered and this market-orientated approach has been criticised.18 Although traditional command and control regulation can be effective at reducing emissions the government is required to know what standard is required to be set for each individual entity that creates emissions which can be costly. Alternatively, a tax is another way of reducing emissions putting a fixed cost on emissions which creates a disincentive for creating emissions.19 This requires a government to know in advance what price to put on emissions. A tax which is too high will be unduly punitive and a tax that is too low will be too lenient.

By contrast, market-based instruments are designed to require a set outcome with a set amount of emissions and leave the market through transfer of the prescribed authorisations to determine how to achieve such an outcome.20 The main problem with the market approach is price volatility.21 Such market instruments are also quite administratively complex.

This administrative complexity means there are in essence two market-based approaches to reducing emissions in the Kyoto Protocol. The first mechanism is the “cap-and-trade” system. Article 3(7) assigns developed countries through the International Transaction Log a number of Assigned Amount Units (AAUs) in accordance with its prescribed obligation to reduce emissions detailed in Annex B. One emissions unit is allocated which allows the holder to emit one tonne of carbon dioxide equivalent into the atmosphere. There are a limited number of emissions units assigned (known as the cap) so an entity which does not emit any greenhouse gases but is given an emissions unit may sell that emissions unit to an entity which does wish to emit greenhouse gases into the atmosphere for money (known as trading). An entity which emits greenhouse gases without emissions units will face penalties. This process is known as international emissions trading. The stringency of the cap can be quite contentious. A related concept is known as Joint Implementation.22 This is where one developed country finances another developed country to engage in “projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases.”23 The developed country financier is granted Emission Reduction Units (ERUs) from the developed country that reduced emissions. The developed country that reduced the emissions is required to surrender an equivalent amount of AAUs for the amount of ERUs that the developed country financier was granted.

The second market-based approach to reducing emissions in the Kyoto Protocol is known as “baseline-and-credit” system. A baseline is created for industries based on an average and historical pattern of emissions (the baseline). If the entity emits less than the baseline, such an entity is given emissions units (the credit). If an entity emits more than the baseline, such an entity must buy emissions units which other entities have created from reductions. The baseline can be static or can reduce over time. The setting of the baseline is therefore quite controversial. A simple analogy to the baseline-and-credit system is where developed countries change greenhouse gas concentrations with “removals by sinks resulting from direct human-induced land use change and forestry activities (LULUCF), limited to afforestation, reforestation and deforestation since 1990”24 and there is an allocation of Removal Units (RMUs) to the developed country from the baseline of having no sinks removals.25 Consistent with this, developed countries are liable for deforestation that takes place before 1990.26 A more pure form of the baseline-and-credit system is provided in the Clean Development Mechanism.27 This means that developed counties can earn Certified Emissions Reductions (CERs) for financing reductions in developing countries overseen by the executive Board of the Clean Development Mechanism. Such reductions must be “[r]eal, measurable, and long-term benefits related to the mitigation of climate change” and such emissions reductions “are additional to any that would occur in the absence of the certified project activity.”28 Moreover, the purchase of CERs must be additional to domestic actions at reducing greenhouse gas emissions.29

III Climate Change Response Act 2002

In New Zealand, the Convention and the Kyoto Protocol have been incorporated into New Zealand law by the CCRA 2002. As described previously, the purpose of the Act is “to enable New Zealand to meet its international obligations under the Convention and the Protocol” including the obligation to limit the number of tonnes of greenhouse gases emitted in the first commitment period as well as to report to the Convention Secretariat of New Zealand’s greenhouse gas emissions.30 In essence, it is based on a “cap-and-trade” emissions trading scheme model.31 The Act is:32 to provide for the implementation, operation, and administration of a greenhouse gas emissions trading scheme in New Zealand that supports and encourages global efforts to reduce greenhouse gas emissions… by reducing New Zealand’s net emissions below business-as-usual levels.

In this context:33 business-as-usual levels means the levels of New Zealand’s greenhouse gas emissions [estimated] at any particular point in time, as if the greenhouse gas emissions trading scheme provided for under this Act had not been implemented.

Although the Government originally anticipated the RMA 1991 or a carbon tax would be appropriate and to this end engaged in various Negotiated Greenhouse Agreements (NGAs) as well as tenders for Projects to Reduce Emissions (PREs), in 2008 the Government decided to create the New Zealand Emissions Trading Scheme (NZETS) by amending the CCRA 2002.34 There were other additional measures, described later, to enhance New Zealand’s forestry.35 With a change in Government in 2009, a further amendment Act changed the dates for implementation of various obligations under the NZETS but did not modify the NZETS’s underlying structure.36

IV A New Zealand Emissions Unit in Theory

A. Property?
In order to determine the intricacies of emissions units an appropriate starting point concerns the philosophical concept of property.37 Property is inevitably described as a bundle of rights. For Fraser, property “is a complex and contestable construct… a construct of law [that] is not divorced from the political and economic context within which it operates.”38 Fraser tabulates the liberal incidences of ownership noted by Honoré as including the right to possess, use, manage, income, capital, security, as well as the incident of transmissibility, the absence of a defined term, and prohibition on harmful use.39 There is also liability to execution (removal of ownership in certain circumstances such as bankruptcy) and having a residuary character (when lesser interests end, the residuary ownership returns to the owner).40 Hence, it becomes obvious that different property will involve different qualities of interests.41 The argument follows that the regulation of natural resources calls for “a property-based solution… to control resource use.”42 This avoids the tragedy of the commons43 where there is no managerial control and individual interests run riot. However, there are a number of alternative solutions to addressing environmental scarcity. A major detraction of a property based solution is that property gives the property owner unwarranted status. For Gray, property merely “add[s] moral legitimacy to the assertion of self-interest [over] resources.44

How natural resources have been treated in the past is an appropriate comparison. In Roman law there were in addition to private property, four types of nonexclusive property.45 There was res communes which were things owned by no one but open to use by all due to their fugacious nature (air, freshwater and oceans); res publicae as things belonging to the public (roads, harbours, ports and bridges); res universitatis which is property belonging to a group of the public (theatres and racecourses); and res nullius, things belonging to no one until captured or things belonging to no one as they were too sacred (wild animals and dead bodies). The distinction between res communes where the impossibility of ownership means that everybody can use a fugacious resource and res nullius which turns nonownership into ownership is complex. This is illustrated in s 122 of the RMA 1991 where resource consents are declared to be neither real nor personal property.46 Hence, the literature regarding the treatment of natural resources in resource consents under the RMA 1991 provide a useful base upon which to consider the legal nature of an emissions unit. In the author’s view the legal treatment of resource consents in s 122 of the RMA 1991 dovetails intentionally with the lack of a compensation regime in the RMA 1991.47 Hence, the RMA 1991 “floats, rather like oil on water, across the top of ownership rights without affecting the underlying substance.”48 It can be added that “[m]any things that have commercial value do not constitute property.”49 Hence, Fraser contends that resource consents are not property whatsoever but a form of statutory licence.50 That argument’s coherence is in the fact that resource consents are a matter of statutory interpretation rather than property law.

As freedom of transfer is a prerequisite for an emissions unit’s purpose to reduce greenhouse gas emissions, an emissions unit is best conceived as “property.”51 Unlike resource consents, there is no statutory wording stating that emissions units are not property. In terms of resource consents, Barton argues property concepts “have a great attraction [but] a dangerous strength.”52 By contrast, Grinlinton takes the nuanced view that resource consents are “statutory property” analogous but not necessarily a statutory licence.53 Emissions units would seem to fit within the sphere of statutory property given the theoretical need for trading and transfer in an emissions trading scheme. It is to be noted that emissions units like resource consents “are solely governed by the rules in the statute that create them, and other generic principles of law.”54 This involves recognising that while at common law, air like water in “its natural state is incapable of individual ownership”,55 the creation of an emissions unit under the CCRA 2002 is used in a market solution to scarcity which rests upon an economic need for private property. Similar to resource consents under the RMA 1991 for the use of natural resources, it is arguable that the question of emissions units is one of priority. The words of the statute should be used first followed second by property concepts.

B. Units?

Despite other emissions trading schemes being described variously as involving an “authorisation”,56 “tradable permit”57 “allowance”,58 “offset”,59 “credit”,60 or “certificate”,61 the NZETS uses the word “unit.”62 In this respect, a unit represents “a standard amount of a physical quantity”,63 namely, the avoidance of one tonne of carbon dioxide equivalent (CO2-e is the standard measurement for greenhouse gases).64 Under the CCRA 2002 a “unit” is defined as “a Kyoto unit, a New Zealand unit, or an approved overseas unit.”65 The Kyoto units have been described above and are unremarkably defined as such. A New Zealand Unit is “a unit issued by the Registrar and designated as a New Zealand unit.”66 An approved overseas unit is a unit other than a Kyoto unit that is “issued by an overseas registry” and “prescribed as a unit that may be transferred to accounts in the Registry.”67 Currently, there has been are no approved overseas units which are freely transferrable to be imported into New Zealand.68 Such an overseas unit may be able to be converted into a Kyoto unit in its own Registry to allow importation to New Zealand.

C. Ownership of Units?

The CCRA 2002 stipulates that any “person may [apply] to open [one] or more holding accounts in the unit register” in order to hold an emissions unit.69 There is one major exception to the “holding of units” in a “holding account.” This is s 29 which provides that a printed search result that purports to be issued by the Registrar is receivable as evidence and is proof of any matter recorded in the unit register including “the ownership of units.”70 Section 30A, nonetheless, stipulates that no action may lie against the Crown for an inaccuracy in a Registrar’s search of the Register.71 Despite the “holdings” terminology, Cameron has argued that “account holders can be said to “own” the units they hold in their accounts. This is primarily due to the rights that “holding” units gives.”72 The wording of holding of units is not, however, accidental. Holding is consistent with the RMA 1991.73 The difference “is between being the owner and being treated as the owner.”74 This is analogous to ostensible ownership. Private property can “never truly [be] private [as the] control function of “property” is delegated sovereignty.”75 This means for all evidential purposes a NZU can be capable of ownership but as a matter of law a NZU can only ever be held because the legislature created and defined such a right. This aligns with stewardship principles in environmental law.76 The ramifications of such wording mean that the doctrine of eminent domain with a right of compensation is entirely inappropriate in this context.77

Such an interpretation of statutory property rights in environmental market-based instruments has proved an important feature of the Fisheries Act 1996.78 In New Zealand Fishing Industry Association v Minister of Fisheries, the Minister decided to reduce a total allowable commercial catch of snapper for a specified area by 39 per cent to ensure sustainability.79 In the Court of Appeal, it was held the Minister failed to have regard to “the possibility of Crown acquisition of quota.”80 The Court explained that although the quota was a property right, such recognition did not otherwise mandate special treatment:81 While quota are undoubtedly a species of property [,] the rights … are not absolute. They are subject to the provisions of the legislation establishing them. That legislation contains the capacity for quota to be reduced. If such a reduction is otherwise lawfully made, the fact that the quota are a “property right”… cannot save them from reduction. That would be to deny an incident integral to the property concerned.

There has been considerable litigation challenging the Minister’s decision as to appropriate quotas under the Fisheries Act 199682 and in Swanson v Swanson a quota was held to be property for the purposes of the Matrimonial Property Act 1976.83 While these quotas themselves are unique, the analogy with an environmental market-based instrument is appropriate as significant case law is already emerging in the European Union as to the ability to challenge free allocations of emissions units (in essence, the cap or the baseline) which is comparable to New Zealand fisheries litigation.84

D. A Right to Emit Greenhouse Gases?

An enduring debate is whether an emissions unit is a right to emit or not. For instance, in New Zealand, Grinlinton defines the NZU as “a reverse nonexclusive profit à prendre in the right to emit [greenhouse gases] into the atmosphere.”85 Bertram takes the opposing view that the NZU “is not a right to emit carbon” but “a voucher relieving its holder of the need to go… and buy an emissions unit… in order to produce one tonne of CO2-equivalent emissions.”86 Another view is that of Cook who argues “allowances are not themselves a licence to emit [as] each entity covered… must obtain from the government an emission permit.”87 This means it is still necessary to apply for resource consent for an air discharge for stationary activities under the RMA 1991 although such a requirement is unnecessary for non-stationary activities.88 The epigraph above from the Marrakesh Accords clarifies that an emissions unit can never be a right to emit because even before emissions trading there was never such a right. This again traverses the ownership-holding distinction. The European Union’s use of the word “allowance” entrenches this conceptualisation because allowance invokes the language of a privilege not a right with an element of permissibility.89 This theoretical underpinning of having a statutory authorisation rather than an omnipresent property right is essential to the theoretical nature of emissions units.

E. Real Property?

It is appropriate to introduce here the broader definition of an emissions unit found identically in the Securities Act 1978 (SA 1978), Securities Markets Act 1988 (SMA 1988) and the Personal Property Securities Act 1999 (PPSA 1999). The definition refers to emissions units rather than NZUs to explicitly include voluntary emissions as Voluntary Emissions Reduction Units (VERs). These statutes provide that an emissions unit, thereby including a NZU, means:90

  1. (a) units as defined in section 4(1) of the Climate Change Response Act 2002
  2. (b) personal property that-
    1. (i) is created by, or in accordance with, any enactment (whether of New Zealand, another country, or any jurisdiction of any country), rule of law, contractual provision, or international treaty or protocol as
      1. one of a fixed number of units issued by reference to a specified amount of greenhouse gas; or
      2. evidence of a specified amount of reductions, removals, avoidance, storage, sequestration, or any other form of mitigation of greenhouse gas emissions; and
    2. (ii) can be surrendered, retired, cancelled, or otherwise used to-
      1. (A) offset greenhouse gas emissions under, or otherwise comply with, any enactment (whether of New Zealand, another country, or any jurisdiction of any country), rule of law, contractual provision, or international treaty or protocol; or
      2. (B) enable a person who surrenders, retires, cancels, or otherwise uses it to claim an environmental benefit

Notwithstanding the definition of an emissions unit as personal property, each Act defines the emissions unit in a different way. For instance, under the PPSA 1999 an emissions unit is an “investment security.”91 By contrast, the SMA 1988 defines an emissions unit as a “commodity”92 and the SA 1978 defines an emissions unit as a “chattel.”93 The SA 1978 treats “chattels” and “interests in land” in the same manner as exemptions from the Act.94 These definitions highlight a tension apparent between real and personal property.

Whether an item is real property or personal property ultimately depends on the “degree and object of its annexation.”95 This requires an objective test as to attachment to land followed by a subjective test as to the intention of the parties involved in the particular transaction. When applying the tests to emissions units, the degree of annexation would indicate that emissions units in trees are attached to the land.96 The object of annexation would seem to require that emissions units are personal property given explicit statutory references. However, personal property can change into real property. The question needs to be asked, therefore, how will the contractual relationship between a land owner and a holder of emissions units survive the sale of that land upon which trees are affixed? The answer is in s 195 of the CCRA 200297 where the Environmental Protection Agency (EPA) must notify the details of forestry to the relevant Registrar of the relevant land database.98 Upon receipt of the notification, the relevant Registrar must record the notice on the appropriate record, register or deeds index. For transactions involving post-1989 forest land, s 192 of the CCRA 2002 details how such transactions are to take place under the NZETS.99

As further analysed in the final chapter, New Zealand has not created a carbon sequestration right like Australian states. The question must be asked given the provisions of the CCRA 2002 whether an emissions unit will support a caveat in order to determine whether an emissions unit is real property as an interest in land. What will the legal situation be if the contractual situation is not reflected on the relevant databases or the relevant land register is different from the database under the CCRA 2002? Although emissions units can be likened to profits à prendre (right to take)100 which are caveatable,101 an emissions unit does not in truth take anything from the land but rather something is being brought onto the land itself (carbon) analogous to a profit à rendre (right to give back).102 Of course, such a right could only ever be equitable devaluing any real property status.103 Keppell v Bailey states, based on the numerus clausus (closed in number) principle,104 that interests in land should not be expanded because there is always a contractual rather than real property remedy.105 The argument has superficial merit based on the disaggregation of rights which could conflict. That is, the person who owns that land can divest himself of forestry rights. In Australia, the person who has the forestry rights could further divest himself of the carbon sequestration rights. In New Zealand as the legislature did not give any power in the CCRA 2002 to caveat, the creation of an interest in land for emissions units could be going too far. The legislature intended that the explicit provisions of transmission would be followed.106 Any opposing argument would point to the necessity of “claim[ing] an environmental benefit”. If an emissions unit is divorced from the environmental benefit,107 the benefit would be rendered worthless. This is definitely a complicated area of law that needs clarification.

F. Income?

Tax law is central to understanding the nature of an emissions unit.108 Although politics conflates emissions trading and carbon taxes,109 for taxation purposes emissions units are property. Emissions units are generally held on revenue account as part of “revenue account property.”110 This means that “taxable income arises and tax deductions are created in respect of these transactions.”111 Emissions units are thereby “trading stock”112 and “excepted financial arrangements.”113 Nonetheless, there are a significant number of explicit exceptions which are dependent on the nature of the emissions unit. For instance, pre-1990 forest emissions units and fishing quota emissions units which are allocated as compensation are treated as “capital property” which means that “income tax liabilities do not arise from the allocation of [these emissions units] by the Crown or from the subsequent sale of [these emissions units].”114 This is achieved by treating such emissions units as excluded income.115 In addition, international accounting standards may influence how emissions units are treated for taxation purposes. In the absence of specific guidance, the terms “intangible asset”,116 “government grant”,117 “contingent liability”118 are all currently used.

G. Service?

Moreover, the supply of an emissions unit is generally treated as a zero-rated service under the Goods and Services Tax Act 1985 (GST Act 1985) to ensure that emissions units can be traded on international markets. Zero-rating is consistent with some contributions to a local authority that is a condition of a resource consent or a development contribution.119 Thus, s 11A(1) of the GST Act 1985 provides that “[a] supply of services [as detailed] must be charged at the rate of 0 [per cent].”120 This includes “the services [of] an emissions unit [where] the supply is the transfer of the emissions unit other than a transfer by the Crown” under a Crown agreement121) and “the services [of] an emissions unit [where] the supply is the surrender of the emissions unit under s 63 of the” CCRA 2002.122 Zero-rating is also applied where an emissions unit is issued either for free allocation or for removal activities.123 Interestingly, the issuing of an emissions unit for free allocation or for removal activities is both a service and a good.124 The final category is zero-rating for a voluntary emissions reduction unit (VER) that is sold or otherwise disposed of “issued by reference to the sequestration, or avoidance of emission[s], of human-induced greenhouse gases” and is “verified to an internationally recognised standard.”125 The one exception to zero-rating is essentially the rare situation that a business pays to another business (not the Crown) in emissions units rather than in cash.126

V A New Zealand Emissions Unit in Practice

A Registry

Under s 10 of the CCRA 2002, a Registry in New Zealand is established which provides for the “accurate, transparent, and efficient accounting” of the “issue of New Zealand units” as well as “the holding, transfer, surrender, and cancellation” of NZUs and approved overseas units.127 It also allows “the conversion of [NZUs] into [AAUs]” and “the accurate, transparent, and efficient exchange of information between the Registry and overseas registries.”128 This Act is administered by the EPA.129 With the appointment of a Registrar to operate the Registry, the Registry must have a unit register under s 18 “in electronic form… accessible via the Registry’s Internet site [and] operated at all times unless the Registrar suspends its operation.”130 That unit register must contain “a record of the holdings of units [with] the particulars of transactions [including] the issue, transfer, retirement, surrender, conversion, and cancellation of units.”131 Importantly, a unit recorded in the unit register is “indivisible” and “transferrable.”132 Section 18A means that any “person may submit an application to the Registrar to open [one] or more holding accounts in the unit register.”133 Section 18B is worded similarly in relation to closing a holding account although the EPA may close an account if written notice is given by the account holder or reasonable notice is given of the intended holding account closure.134

B. Holding Account

In order to open a “holding account”, a person must be a “qualified person” which seems broad enough to encompass anyone who is not otherwise disentitled.135 Once a “holding account” has been created, there may (or must if an entity other than an individual applies) be the appointment of “at least [one] but no more than [five] primary representatives… to operate the holding account on the account holder’s behalf.”136 Such primary representative must be natural persons who are not otherwise disentitled.137 This use of primary representatives to operate the holding account on the account holder’s behalf will mean that in the event of fraud, given vicarious liability, the account holder will be liable.138)

C. Participants

A person who has obligations under the NZETS is called a participant and participation is determined by activities undertaken.139 There are mandatory participants (in schedule 3)140 and voluntary participants (in schedule 4).141 The nature of participation is further divided between mandatory reporting and full obligations. Today, those sectors that have full obligations include forestry, liquid fossil fuels, stationary energy and industrial processes.142 Those that have mandatory reporting obligations are synthetic gases, waste and agriculture.143 A useful example of the interaction between mandatory and voluntary participant obligations is in the liquid fossil fuels sector where the mandatory participant is the importer or producer of liquid fossil fuels rather than the downstream consumer who combusts the fuels. The voluntary participant for liquid fossil fuels could be a jet fuel purchaser where the jet fuel purchased exceeds a specified limit.144 While there is the possibility of exemptions from the NZETS, special circumstances would seem to be required to exist.145 For a mandatory participant, a person who carries out such an activity must notify the EPA that the person is a participant and that person must apply to open a holding account while subsequently notifying the EPA of the holding account number.146 This means that a participant must have a holding account.147 There must, moreover, be monitoring although not necessarily verification148 of the participant’s activities “in accordance with the methodologies prescribed.”149 The central operative provision over a participant’s obligations is s 63 of the CCRA 2002 which provides that “a participant is liable to surrender [one] unit for each whole tonne of emissions from each activity listed in schedule 3 or 4 that the participant carries out” as calculated and at the times required by the Act.150

A person who undertakes removal activities under the NZETS is called a participant but participation is voluntary. If the participant wishes to obtain emissions units for removals that person must have a holding account.151 Such a “participant is entitled to receive [one] New Zealand unit for each tonne of removals from the participant’s removal activities, as calculated in accordance with this Act.”152 Like participants with obligations, there must be monitoring although not necessarily verification153 of tholhe participant’s activities as “prescribed.”154 This monitoring means that participants must report their emissions and removals in an annual emissions return (although quarterly emissions returns are possible for non-forestry activities).155 The annual emission return starts from the 1 January each year and finishes on the 31 December. The participant has from the 1 January until the 31 March in the following year to submit an annual emissions return for the preceding year to the EPA for the activities carried out.156 This would specify the participant’s liability to surrender units and its entitlement to receive units for removals. In some circumstances, it is possible to submit a “final emissions return” outside of the normal annual cycle.157

D. Free Allocation to Pre-1990 Forest Land and Fishing

NZUs are freely allocated to owners of pre-1990 forest land and fishing quota owners. This free allocation is made in accordance with an allocation plan. Before these allocation plans are recommended by the Minister, the Minister must consult or be satisfied that consultation has taken place with representatives of persons who appear likely to have an interest in the “pre-1990 forest land allocation plan”158 or in the “fishing allocation plan.”159 These allocations plans set out specific criteria which must be met before a free allocation will take place. When an allocation plan becomes operative, the Minister must advertise inviting those eligible to apply for a free allocation in accordance with the allocation plan.160) After an application is received, the Minister must make “a preliminary determination in accordance with the allocation plan” which is to be followed with “a final determination.”161 In rare circumstances, the Minister may “reconsider, revoke, and replace a determination.”162

E. Free Allocation to Emissions Intensive Trade Exposed Participants

NZUs are also freely allocated to “emissions intensive trade exposed” (EITE) industries.163 The key word here is “intensive” which indicates that there are elements of a “baseline-and-credit” emissions trading scheme model being used. To qualify, an “eligible industrial activity in respect of a year”164 must be either “moderately emissions-intensive”165 or “highly emissions-intensive.”166) They must be “trade exposed.” Consultation must take place as to what is an eligible industrial activity with those affected.167 A notice will be published in the Gazette describing the eligible industrial activity and requiring those carrying out that activity to submit certain information.168 Those who do not respond will not be eligible for a free allocation.169 Regulations will be subsequently made for that eligible industrial activity.170 If an eligible industrial activity, provisional171 and final allocations172 can occur if an application is made.173 If entitled to a free allocation, a free allocation will be given subject to a right to review of an allocation decision.174 However, where an allocation decision has been made, the decision may be “reconsider[ed], var[ied], or revoke[d]” in rare specified circumstances.175 Similar provisions apply to agriculture.176

F.  Transfer

Importantly, an account holder can apply to the Registrar to transfer units from that account holder’s holding account to another account in the unit register or an overseas registry. There are specific types of units that cannot be held at all177 and other specified units with a restriction on transfer.178 Where possible the Registrar must transfer the specified units as requested subject to a specified procedure. A transaction to issue, transfer, cancel, retire, surrender, convert or replace units must be registered on the unit register.179 That transaction is registered when the Registrar assigns a registration number and time to the transaction and enters those particulars in the unit register.180 The transaction will take effect when registered.181 Where an application for registration of a transaction of an account holder is made the Registrar must “as soon as practicable” process the transactions “in the chronological order in which [such transactions are] received.”182 In terms of definition, only the Registrar may “issue”,183 anyone can “transfer” subject to restrictions,184 anyone may “surrender” a unit to meet is its obligations,185 anyone may “cancel” a unit,186 only the government can “retire” units,187 and the Registrar may “convert” NZUs into AAUs for overseas sale.188 The term “replace” and “expires” generally refer to the complex system of CERs in the NZETS.189

G. Transmission

There are detailed provisions relating to transactions involving post-1989 forest land under the NZETS.190 For post-1989 forestry, landowners and those that hold a registered forestry right or a lease registered in respect of that land must both agree in a written agreement as to who is to be registered under the NZETS for registration to take effect.191 As seen above, pre-1990 forest land, post-1990 forest land, or exempt land is noted on the relevant land record, register, or deeds index.192 For transactions s 192 allows transmission from a transferor and transferee on a date of transmission.193 A transferee would be well advised to request all emissions returns and the “unit balance” of each carbon accounting area applicable.194 This enables the transferee to determine outstanding liabilities and entitlements and the amount of any contingent liability assumed on becoming participant. The transferor must submit an emissions return to the EPA within 20 working days of the transferee becoming the participant to enable all entitlements and liabilities to be brought up to date.195 The transferor could, of course, remove the post-1989 forest land from the NZETS altogether prior to sale.196 The purchase price would reflect such NZETS entitlements or liabilities.

H. Offences and Penalties

The NZETS in harmony with the taxation system relies on self-assessment. An analogy with the provisions of the Tax Administration Act 1994, therefore, is inevitable. Under the CCRA 2002, enforcement officers are appointed which may require any person by notice to provide “any information [to ascertain] whether a person is complying… with the [Act].”197 The EPA or chief executive may require a person to appear before him or her to provide information.198 If the EPA or chief executive wishes, they may request a District Court to hold an inquiry for the purposes of obtaining information.199 An enforcement officer may also enter land or premises with reasonable notice,200 or obtain a warrant if expediency is required.201 While on the land or premises, they may require documentation, take samples, and carry out investigations. Various offences attach to failure to comply involving terms of imprisonment and/or associated fines.202 Where an emissions return is incorrect, an amendment may be found to be necessary.203 Where a participant does not submit an emissions return or where there is a failure to register as a participant requiring an emissions return, an assessment of the emission’s return is to be made.204 Various offences attach to non-compliance, the most significant of which is a mere innocent mistake requires “an excess emissions penalty of $30 for each unit… the person fails to surrender[, or repay]”205 in addition to “surrender[ing] or repay[ing] the units required [under the Act].”206

I. Fraud

Emissions trading is based on the infallibility of an internet platform. Like any personal property, an emissions unit is worth money and is capable of forgery or being stolen. While emissions units can be lost by internet viruses, server faults, and data loss, fraud remains a predominant concern. In 2010, the European Union Emissions Trading Scheme was undermined when malicious emails were received by users redirecting them to a fake Emissions Trading Scheme website to input their username and password details.207 Despite many jurisdictions suspending their emissions registries, over 250,000 emissions units were stolen.208 In New Zealand, there is little doubt that any person engaging in such activity would be liable for a criminal offence under the Crimes Act 1961.209 The Registrar would of course exercise the power to suspend the Registry under s 13 of the CCRA 2002.210

An important question concerns who would bear the cost of fraud in the event that the money was never recovered. This would come down to whether a NZU is tangible (chose in possession) or intangible property (chose in action) in the tort of conversion. In the SA 1978 an emissions unit is defined within the definition of a tangible “chattel” whereas under the PPSA 1999 an emissions unit is an intangible “investment security.”211 Section 15 of the CCRA 2002 means that the Registrar may “allocate a unique serial number to (i) a New Zealand unit.”212 If a unique serial number can trace the eventual sale of the NZU, the tort of conversion would indicate that the eventual buyer of the tangible property who buys an ineffectual title under the nemo dat rule would be liable for conversion of the tangible goods to the person who has good title.213 Intangible property is incapable of conversion because the law of torts is reluctant to compensate pure financial loss.214 An exception applies if there is interference with a document that embodies or evidences the intangible property.215 Here, the question of whether an emissions unit is seen as tangible or intangible seems moot. Given an extensive market and the fact that emissions units could be evidenced in documentary form,216 the tort of conversion would seem appropriate. The contrary argument would be that emissions units do not exist without the electronic format. It is an invented creature of cyberspace and is detached from its environmental benefits. Hence, consistent with internet banking fraud, liability could fall onto the consumer due to the customer’s own negligence.217

VI Personal Property Securities Act 1999

Due to its definition as an investment security under the PPSA 1999, an emissions unit is capable of acting as security in the same way as “a futures contract, or a warrant or option or share, right to participate, or other interest in property or an enterprise.”218 For the purposes of the PPSA 1999, a creditor will obtain a security interest over a debtor’s emissions unit when a security agreement is signed by the creditor and debtor. The security interest will be perfected and therefore enforceable against third parties once the creditor has taken possession of the emissions unit. Section 18(1A) of the PPSA 1999 states that if an emissions unit is evidenced by a certificate, possession requires physical possession of that certificate. If the emissions unit is traded or settled through a clearing house or securities depository, the clearing house or securities depository must record an interest in the emissions unit. If the emissions unit is held by a nominee, the nominee must record an interest in the emissions unit. If the emissions unit is of the CCRA 2002 nature, the CCRA 2002’s unit registry must record the possession of the unit. Section 18(1A)(e) of the PPSA 1999 provides a catch-all which means that if “a person who is responsible for recording the holders of emissions units… record[s] that interest… in the emissions unit” such is sufficient for possession.219)

As Cameron notes, for possession in the CCRA 2002 context the account holder must consent to the creditor’s name being recorded as having possession of the units and the account holder cannot transfer any emissions units out of the holding account without the consent of the creditor.220 Despite this, the creditor “may not use the holding account for the purposes of making a transaction.”221 Where the debtor and the creditor are in agreement to sell the emissions units in accordance with the securities agreement, no real problem arises.222 This means that under s 97 of the PPSA 1999, if any person who gives value, takes possession, and has no knowledge of a particular security interest, that person is entitled to priority over that of the security interest. If that purchaser knew that the purchase would breach any security agreement, such knowledge disentitles the purchaser from taking priority. Cameron provides sound advice that the enforcement provisions under the PPSA 1999 when a debtor defaults on its repayment obligations may prove insufficient and therefore any security agreement should specify that in the event of default the creditor can require the debtor to transfer the emissions units into its own holding account.223

VII Securities Act 1978 and Securities Markets Act 1988

The SA 1978 is designed to ensure that any offer of securities to the public for subscription will be made by way of an investment statement or a registered prospectus. Investors are to rely on these documents for authoritative information. There are exemptions from the Act including “[a]ny proprietary rights to chattels”224 such as livestock and emissions units.225 Another significant exemption is estates or interests in land. Where such chattels or estates or interest in land form part of a contributory scheme in which the number of investors is more than five and there is a manager of the scheme, the exemption from the Act does not apply. While the SA 1978 deals with the primary market of fundraising, the SMA 1988 concerns the secondary market of trading securities, price setting and the prevention of market abuse. The SMA 1988 defines emissions units as a commodity as “any type of goods; and includes foreign currency, a financial instrument, and emissions units.”226 This flows into the definition of futures contracts. Such a futures contract may specify a “price which is fixed” or “an obligation to pay a sum of money” for a “specified commodity” at “a specified future time” or “a future date.”227 Transactions settled in cash involving the future sale of emissions units are likely to be future contracts to which the SMA 1988 future dealers regime applies although merely “the physical delivery of emissions units” would not seem to fall under the definition.228

VIII Income Tax Act 2007

Emissions units are generally treated as income which means that taxable deductions are created. Where there is taxable income, such income may be recognised “on an accruals basis [meaning] a tax liability does not arise immediately on allocation of the [emissions units], but is treated as arising on an emerging basis over the period which the allocation relates.”229 On the disposal of an emissions unit, the amount derived is treated as taxable income.230 Surplus emissions units that are not disposed of will “be added back [to income] at cost at [the financial] year-end to the extent they are still on hand.”231 However, not all emissions units are treated the same for taxation purposes. This means businesses which hold emissions units from different sources must keep separate “pools” for valuation purposes.232 As noted previously, pre-1990 forest emissions units and fishing quota emissions units are treated as capital to which no deduction is available. Moreover, no deduction will be available if the acquisition of an emissions unit is free.233 Nor will a deduction be available for liabilities arising for post-1989 forestry because deduction is achieved with the emissions units being surrendered for liabilities as the sale being for zero dollars.234 This is better known as “cash basis” accounting rather than “accruals basis” accounting.235

The timing of any valuation of emissions units is dependent on its nature which will enable inconsistencies to arise. As Gehring and Streck note, “[t]he newness of [emissions units] has allowed traders to put fantasy numbers into their balance sheets.”236 Certainly there is the potential for a tax avoidance arrangement to include the elusive emissions unit because they would seem to be inflatable given heterogeneous treatment of emissions units and being generally being a deductable expense. An example of a related tax avoidance arrangement in the context of forestry is Ben Nevis Forestry Ventures v Commissioner of Inland Revenue which involved a Douglas Fir forest with a 50 year rotation cycle having complex licence agreements and insurance arrangements.237 Nevertheless, the law of tax avoidance will cover such situations as the drawing of “bright-line rules [are] undesirable and impractical in taxation law.”238 Anti-avoidance provisions are designed to “thwart technically correct but contrived transactions set up as a means of exploiting the [ITA 2007] for tax advantages.”239

IX Death and the Insolvency Process

The question arises as to the extent to which an emissions unit survives the account holder. If an account holder is a natural person and dies or is not a natural person but is wound up, liquidated, dissolved or otherwise ceases to exist then the account holder’s personal representative may operate the holding account until a successor is determined and the Registrar registers the successor as the account holder.240 There is also provision241 for those involved in an insolvency process such as receivership,242 liquidation243 or bankruptcy.244 If a participant is required to surrender or repay units and enters into such an insolvency process, the chief executive must purchase or surrender on the person’s behalf the required units.245 The “costs of purchasing the units, and any administrative costs incurred in their surrender or repayment… constitutes an unsecured debt to the Crown.”246 If a participant has emissions units, such emissions units will constitute property which will pass to the Official Assignee, Liquidator, or Receiver.247

X Conclusion

This chapter has analysed the legal nature of the NZU. Beyond the politics of whether specific sectors should enter the NZETS and if so the extent of any free allocation of New Zealand units, sits this critical question. The ultimate purpose of the NZU is to reduce greenhouse gas emissions through emissions trading with the NZU representing the avoidance of one tonne of carbon dioxide equivalent emissions. With this, the many questions over the nature of the NZU can begin to be answered. A NZU is unlikely to require compensation for compulsory acquisition because an NZU is held rather than owned. That is, a NZU can never create a right to emit but can only allow its holder to emit. The terms “personal property”,248 “commodity”,249 “chattel”,250 “trading stock”251 and “good”252 in this context are preferable to the language of an “interest in land.”253 Although capable of being seen as “revenue”,254 a “financial instrument”,255 or “an investment security”256 as well as having the opposing qualities of being “excepted financial arrangements”257 and “capital”,258 the term “service”259 as an avoidance of emissions would seem to be a better encapsulation of the NZU. With the reduction of greenhouse gases at its core, an emissions unit operates in an emissions registry by being held in participants’ holding accounts. Participants may have received a free allocation or are otherwise willing to transfer emissions units to meet its surrender or repayment obligations which if not met are subject to a variety of offences. Accordingly, the function of emissions units under a variety of other statues entrench the status of emissions units as a statutory created form of personal property ultimately designed to reduce greenhouse gas emissions.

  1. United Nations Framework Convention on Climate Change “Report of the Conference of the Parties on its Seventh Session held at Marrakesh” 29 October – 10 November 2001, Decision 15/CP7 (FCCC/CP/2001/13/Add2, 21 January 2002) <>. []
  2. United Nations Framework Convention on Climate Change 1771 UNTS 107 (opened for signature 9 May 1992, entered into force 21 March 1994), art 2 [UNFCCC]. []
  3. UNFCCC 1992, art 2. []
  4. UNFCCC 1992, art 2. []
  5. UNFCCC 1992, art 1 []
  6. UNFCCC 1992, art 3 []
  7. A differentiation is also made between all developed countries (Annex I) and developed countries without those undertaking transition to a market economy (Annex II). Annex I includes Australia, Austria, Belarus, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, European Economic Community, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russian Federation, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom of Great Britain and Northern Ireland, and the United States of America. Annex II includes Australia, Austria, Belgium, Canada, Denmark, European Economic Community, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom of Great Britain and Northern Ireland, and United States of America. []
  8. UNFCCC 1992, art 4[1][a]. []
  9. Vernon Rive “International Framework” in Alastair Cameron (ed) Climate Change Law and Policy in New Zealand (LexisNexis, Wellington, 2011) 49 at 60: COP-1 Berlin (1995), COP-2 Geneva (1996), COP-3 Kyoto (1997), COP-4 Buenos Aires (1998), COP-5 Bonn (1999), COP-6 The Hague (2000), COP-6.5 Bonn (2001), COP-7 Marrakech (2001), COP-8 New Delhi (2002), COP-9 Milan (2003), COP-10 Buenos Aires (2004), COP-11 Montreal (2005), COP-12 Nairobi (2006), COP-13 Bali (2007), COP-14 Poznan (2008), COP-15 Copenhagen (2009), COP-16 Cancun (2010), COP-17 Durban (2011), COP-18 Qatar (2012). []
  10. UNFCCC 1992, art 11 []
  11. UNFCCC 1992, art 17[1]. []
  12. Kyoto Protocol to the United Nations Framework Convention on Climate Change (opened for signature 16 March 1998, entered into force 16 February 2005) [Kyoto Protocol 1998], art 3(1). []
  13. Kyoto Protocol 1998, Annex B []
  14. Kyoto Protocol 1998, Annex B []
  15. MJ Mace “The Legal Nature of Emissions Reductions and EU Allowances: Issues Addressed in an International Workshop” (2005) 2 JEEPL 123 at 123. []
  16. Montreal Protocol on Substances that Deplete the Ozone Layer to the Vienna Convention for the Protection of the Ozone Layer (open for signature 16 September 1987, entered into force 1 January 1989). []
  17. Clean Air Act 42 USC §7651 (1990). []
  18. See generally: James Huffman “Free Market Environmentalism and Fairness” in Klaus Bosselmann and Benjamin Richardson (ed) Environmental Justice and Market Mechanisms: Key Challenges of Environmental Law and Policy (Kluwer Law, London, 1999) 277 at 280; Robert Nordhaus and Kyle Danish “Assessing the Options for Designing a Mandatory US Greenhouse Gas Reduction Program (2005) 32 BC Envtl Aff L Rev 97 at 160; Benjamin Richardson “Changing Regulatory Spaces: The Privatization of New Zealand Environmental Law?” in Klaus Bosselmann and Benjamin Richardson (ed) Environmental Justice and Market Mechanisms: Key Challenges of Environmental Law and Policy (Kluwer Law, London, 1999) 209 at 229; Matthieu Wemaere, Charlotte Streck and Thiago Chagas “Legal Ownership and Nature of Kyoto Units and EU Allowances” in David Freestone and Charlotte Streck (ed) Legal Aspects of Carbon Trading: Kyoto Copenhagen and Beyond (Oxford University Press, Oxford, 2009) 35 at 38 []
  19. Carbon Tax Act SBC 2008 c 40; Reuven Avi-Yonah and David Uhlmann “Combating Global Climate Change: Why a Carbon Tax is a Better Response to Global Warming than Cap and Trade” (2009) 28(3) Stanford Envir Law J 3; Geoff Bertram and Simon Terry The Carbon Challenge: New Zealand’s Emissions Trading Scheme (Bridget Williams Books, Wellington, 2010); Amy Christian “Designing a Carbon Tax: The Introduction of the Carbon-Burned Tax (CBT)” (1992) 10 UCLA J Envtl L & Policy 221; Lars Hoffmann “The Role of Economic Instruments to Reduce Carbon Emissions and their Implementation: A Comparison of Environmental Policies in New Zealand and Germany” (2006) 10 NZ J Envtl L 129; Gilbert Metcalf and David Weisbach “The Design of a Carbon Tax” (2009) 33 Harv Envtl L Rev 499. []
  20. See generally: Cinnamon Carlene Climate Change Law and Policy: EU and US Approaches (Oxford University Press, Oxford, 2010); Nicola Durrant Legal Responses to Climate Change (The Federation Press, Sydney, 2010); Michael Faure and Marjan Peeters (ed) Climate Change and European Emissions Trading: Lessons for Theory and Practice (Edward Elgar, Cheltenham, 2008); David Hodgkinson and Renee Garner Global Climate Change: Australian Law and Policy (LexisNexis Butterworths, Chatswood, 2008); Dennis Mahony (ed) The Law of Climate Change in Canada (Canada Law Book, Toronto, 2010); Robert Stavins “A Meaningful US Cap-and-Trade System to Address Climate Change (2008) 32 Harv Envtl L Rev 293; Miles Young “Beautifying the Ugly Step-Sister: Designing an Effective Cap-and-Trade Program to Reduce Greenhouse Gas Emissions” (2009) BYU L Rev 1379 []
  21. Barclay Rogers “Carbon Markets” [2007] NZLJ 336 at 336 []
  22. Barclay Rogers “Carbon Markets” [2007] NZLJ 336 at 336 []
  23. Kyoto Protocol 1998, art 6. []
  24. Kyoto Protocol 1998, art 3(3). []
  25. Kyoto Protocol 1998, art 3(4). []
  26. Kyoto Protocol 1998, art 3(4). []
  27. Kyoto Protocol 1998, art 12. []
  28. Kyoto Protocol 1998, art 12(5). []
  29. Kyoto Protocol 1998, art 17. []
  30. CCRA 2002, s 3(1)(a). []
  31. Derek Nolan (ed) Environmental and Resource Management Law (4th ed, LexisNexis, Wellington, 2011) at 1054. []
  32. CCRA 2002, s 3(1)(b). []
  33. CCRA 2002, s 3(3). []
  34. Climate Change Response (Emissions Trading) Amendment Act 2008. []
  35. Karen Price and others The Emissions Trading Scheme – Advising Your Client on Their Obligations (New Zealand Law Society, Wellington, 2010) at 35-38. []
  36. Climate Change Response (Moderated Emissions Trading) Amendment Act 2009 []
  37. See generally: David Dell “Climate Change and Property Law” in Dennis Mahony (ed) The Law of Climate Change in Canada (Canada Law Book, Toronto, 2010) ch 17. []
  38. Laura Fraser “Property Rights in Environmental Management: The Nature of Resource Consents in the Resource Management Act 1991” (2008) 12 NZJEL 145 at 150. []
  39. At 152-153; Anthony Honoré “Ownership” in Anthony Guest (ed) Oxford Essays in Jurisprudence (Oxford University Press, London, 1961) 107 at 112-128. []
  40. Fraser, above n 37, at 153. []
  41. At 153. []
  42. At 156 []
  43. Garrett Hardin “The Tragedy of the Commons” (1968) 164 Science 1243 []
  44. Kevin Gray “Property in Thin Air” (1991) 50 (2) CLJ 252 at 307. []
  45. Paul du Plessis Borkowski’s Textbook on Roman Law (4th ed, Oxford University Press, Oxford, 2010) at 152 – 153. []
  46. RMA 1991, s 122; See also CMA 1991, s 92. []
  47. RMA 1991, s 85; Barry Barton “The Nature of Resource Consents: Statutory Permits or Property Rights” in Derek Nolan and others Environmental Law: National Issues (New Zealand Law Society, Wellington, 2009) 51 at 70. []
  48. Coleman v Kingston HC Auckland AP 103-SW00, 3 April 2001 at [28]. []
  49. Barton, above n 46, at 63. []
  50. Fraser, above n 37, at 165 []
  51. Personal Property Securities Act 1999 [PPSA], s 16, definition of “emissions units”; Securities Act 1978 [SA 1978], s 2; Securities Markets Act 1988 [SMA 1988], s 37; CCRA 2002, s 29. []
  52. Barton, above n 46, at 77. []
  53. David Grinlinton “The Nature of Property Rights in Resource Consents” (2007) 7 BRMB 37. []
  54. At 39; See generally: Martijn Wilder “Nature of an Allowance” in Paul Watchman (ed) Climate Change: A Guide to Carbon Law and Practice (Globe Business Publishing Ltd , London, 2008) 93 at 101. []
  55. At 40. []
  56. Markus Gehring and Charlotte Streck “Emission Trading: Lessons from SOx and NOx Emissions Allowance and Credit System Legal Nature, Title, Transfer, and Taxation of Emission Allowances and Credits” (2005) 35 ELR 10219 at 10221. []
  57. Fraser, above n 37, at 147; Peter Wilson “The Economics of Emissions Trading” in Alastair Cameron (ed) Climate Change Law and Policy in New Zealand (LexisNexis, Wellington, 2011) 127 at 145. []
  58. Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community [2003] OJ L275/32, art 3(a). []
  59. Climate Change and Emissions Management Act 2003 SA 2003 c C-16.7, s 5. []
  60. Climate Change and Emissions Management Act 2003 SA 2003 c C-16.7, s 5. []
  61. Electricity Supply Act 1995 (NSW), s 97AB. []
  62. CCRA 2002, s 4, definition of “unit”. []
  63. Elspeth Summers and Andrew Holmes (ed) Collins English Dictionary and Thesaurus (4th ed, HarperCollins Publishers, Glasgow, 2006) at 1320. []
  64. CCRA 2002, s 4, definition of “carbon dioxide equivalent”. []
  65. CCRA 2002, s 4, definition of “unit”. []
  66. CCRA 2002, s 4, definition of “unit”. []
  67. CCRA 2002, s 4, definition of “approved overseas unit”. []
  68. Alastair Cameron (ed) Climate Change Law and Policy in New Zealand (LexisNexis, Wellington, 2011) at 268. []
  69. CCRA 2002, s 18A. []
  70. CCRA 2002, s 29. []
  71. CCRA 2002, s 30A. []
  72. Cameron, above n 67, at 269. []
  73. RMA 1991, s 122. []
  74. Roger Fenton Garrow and Fenton’s Law of Personal Property in New Zealand: Volume 1 (7th ed, LexisNexis, Wellington, 2010) at 34. []
  75. Gray, above n 43, at 304. []
  76. RMA 1991, s 7; William Lucy “Replacing Private Property: The Case for Stewardship” (1996) 55(3) CLJ 566; Linda Te Aho “Contemporary Issues in Maori Law and Society: Crown Forests, Climate Change, and Consultation – Towards More Meaningful Relationships” (2007) 15 Waikato L Rev 138; Andrea Tunks “Tangata Whenua Ethics and Climate Change” (1997) 1 NZJEL 67. []
  77. Chye-Ching Huang “The Constitution and Takings of Private Property” (2011) 24 (4) NZULR 621 at 630; See generally: Barry Barton “The Legitimacy of Regulation” (2003) 20 NZULR 364; Philip Joseph “The Environment, Property Rights, and Public Choice Theory” (2003) 20 NZULR 408. []
  78. David Grinlinton “Evolution, Adaptation, and Invention: Property Rights in Natural Resources in a Changing World” in David Grinlinton and Prue Taylor (ed) Property Rights and Sustainability: The Evolution of Property Rights to Meet Ecological Challenges (Martinus Nijhoff Publishers, Boston, 2011) 275 at 298; Benjamin Richardson “Changing Regulatory Spaces: The Privatization of New Zealand Environmental Law?” in Klaus Bosselmann and Benjamin Richardson (ed) Environmental Justice and Market Mechanisms: Key Challenges of Environmental Law and Policy (Kluwer Law, London, 1999) 209 at 226-229; Cath Wallace “Environmental Justice and New Zealand’s Fisheries Quota Management System” (1999) 3 NZJEL 33. []
  79. New Zealand Fishing Industry Association v Minister of Fisheries CA82/97, 22 July 1997; Fisheries Act 1996, s 8. []
  80. At 9. []
  81. At 16. []
  82. Antons Trawling v Minister of Fisheries [2007] NZCA 512; Antons Trawling v Minister of Fisheries HC Wellington CIV-2007-485-2199, 22 February 2008; Goodship v Minister of Fisheries CA236/02, 2 October 2003; Huntley v Attorney General HC Wellington CP482/88, 10 March 1999; Kellian v Minister of Fisheries CA150/02, 26 September 2002; Kellian v Minister of Fisheries HC Wellington CP281/01, 22 July 2002; Minister of Fisheries v Pranfield Holdings Ltd [2008] 3 NZLR 649 (CA); New Zealand Federation of Commercial Fishermen v Minister of Fisheries HC Wellington CP237/95, 24 April 1997; New Zealand Recreational Fishing Council v Minister of Fisheries HC Auckland CIV-2005-404-4495, 21 March 2007; New Zealand Recreational Fishing Council Inc v Sanford Ltd [2009] 3 NZLR 438 (SC); Official Assignee v Chief Executive of the Ministry of Fisheries [2002] 2 NZLR 722 (CA); Roaring Forties Seafoods v Minister of Fisheries HC Wellington CP64/97, 1 May 1997; Sanford Ltd v New Zealand Recreational Fishing Council Inc [2008] NZCA 160; Simunovich Fisheries Ltd v Executive of the Ministry of Fisheries HC Wellington CIV20044851987 10 November 2004; Vautier Shelf Company No 14 Ltd v Chief Executive of Ministry of Fisheries HC Wellington CP20/97, 24 July 2000. []
  83. Swanson v Swanson [1999] 1 NZLR 19 (CA). []
  84. Sanja Bogojević “Litigating the NAP: Legal Challenges for the Emissions Trading Scheme of the European Union” (2010) 3 CCLR 219; Navraj Singh Ghaleigh “Emissions Trading before the European Court of Justice: Market Making in Luxemberg” in David Freestone and Charlotte Streck (ed) Legal Aspects of Carbon Trading: Kyoto Copenhagen and Beyond (Oxford University Press, Oxford, 2009) 367; Josephine van Zeben “The European Emissions Trading Scheme Case Law” (2009) 18(2) RECIEL 119; CEMEX UK Cement v Commission [2007] ECR II-146; Drax Power and Others v Commission [2007] ECR II-67; EnBW Energie Baden Wurttemberg v Commission [2007] ECR II-1195; Fels-Werke GmbH and Others v Commission [2007] ECR II-98; [2008] ECR II-48; Germany v Commission [2007] ECR II-4431; Poland v Commission [2007] ECR II-152; Société Arcelor Atlantique et Lorraine and Others v Commission [2008] ECR I-9895; United Kingdom v Commission [2005] ECR II-4807; US Steel Košice v Commission [2007] ECR II-127; [2008] ECR I-96. []
  85. Grinlinton “Evolution, Adaptation, and Invention”, above n 77, at 300. []
  86. Bertram and Terry, above n 18, at 59. []
  87. Allan Cook “Accounting for Emissions: From Costless Activity to Market Operations” in David Freestone and Charlotte Streck (ed) Legal Aspects of Carbon Trading: Kyoto Copenhagen and Beyond (Oxford University Press, Oxford, 2009) 59 at 63. []
  88. RMA 1991, s 15(1); Resource Management (National Environmental Standards for Air Quality) Regulations 2004; For vehicles: Land Transport Rule: Vehicle Exhaust Emissions 2007. []
  89. Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community [2003] OJ L275/32, art 3(a). []
  90. PPSA 1999, s 16, definition of “emissions units”; SA 1978, s 2; SMA 1988, s 37. []
  91. PPSA 1999, s 16, definition of “investment security”. []
  92. SMA 1988, s 37, definition of “commodity”. []
  93. SA 1978, s 2, definition of “chattel”. []
  94. SA 1978, s 5 []
  95. Lockwood Buildings Ltd v Trust Bank Canterbury Ltd [1995] 1 NZLR 22 (CA) at 28 []
  96. Tom Bennion and others New Zealand Land Law (2nd ed, Brookers, Wellington, 2009) at 24; Land Transfer Act 1952, s 2, definition of “land”. []
  97. See Climate Change (Forestry Sector) Regulations 2008, reg 10. []
  98. CCRA 2002, s 195(1). []
  99. CCRA 2002, s 192 []
  100. Conveyancing Act 1919 (NSW) ss 87A, 88AB(1), and 88EA; Forestry Act 1959 (Qld) s 61J(5); Forestry Rights Registration Act 1990 (Tas), s 5; Samantha Hepburn “Carbon Rights as New Property: The Benefits of Statutory Verification” (2009) 31 Sydney LR 239 at 243 at 246. []
  101. Bennion, above n 95, at 279; Ellison Ellison v Vukicevic (1986) 7 NSWLR 104 (SC); Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426 (SC). []
  102. See Clos Farming Estates v Easton [2002] NSWCA 389 at [60]; Hepburn, above n 99, at 243; Brendan Edgeworth “Profits a Rendre: A Reincarnation?” (2006) 12 APLJ 200; Peter Butt Land Law (6th ed, Thomson Reuters, Sydney, 2010) at 513. []
  103. Miller v Minister of Mines [1963] NZLR 560 (PC) at 569; Wellesley Club Inc v Wellesley Property Holdings Ltd [2007] 8 NZCPR 421 (HC) at [38]. []
  104. Hepburn, above n 99, at 241; See also: Brendan Edgeworth “The Numerus Clausus Principle in Contemporary Australian Property Law” (2006) 32 Monash ULR 387; Thomas Merrill and Henry Smith “Optimal Standardization in the Law of Property: The Numerus Clausus Principle” (2000) 110 Yale L J 1. []
  105. Keppell v Bailey (1834) 39 ER 1042 (Ch) at 1049 []
  106. CCRA 2002, s 192. []
  107. PPSA 1999, s 16, definition of “emissions units”; SA 1978, s 2; SMA 1988, s 37 []
  108. See generally: Clinton Alley and others New Zealand Taxation 2012: Principles, Cases and Questions (Brookers, Wellington, 2012) at 66-68; Mark Higgins and Brent Lewers “Tax Consequences of Transactions in Emissions Units” in Karen Price and others Emissions Trading Scheme (New Zealand Law Society, Wellington, 2011) 43; Price Waterhouse Coopers “Emission Critical: Issue 7: December 2008” ; Price Waterhouse Coopers “Emission Critical: Issue 8: September 2009” ; Price Waterhouse Coopers “Emission Critical: Issue 9: September 2009” ; Tony Wilkinson and Carrie Lui “Taxation” in Alastair Cameron (ed) Climate Change Law and Policy in New Zealand (LexisNexis, Wellington, 2011) 447; ; For Australia: Celeste Black “Climate Change and Tax Law: Policy and Emissions Trading” in Rosemary Lyster (ed) In the Wilds of Climate Law (Australian Academic Press, Bowen Hills, 2010) 155; For Canada: John Tobin “Taxation” in Dennis Mahony (ed) The Law of Climate Change in Canada (Canada Law Book, Toronto, 2010) ch 15. []
  109. Huang, above n 76, at 630. []
  110. Income Tax Act 2007 [ITA 2007], s YA 1. []
  111. Ernst and Young “A New Wave for New Zealand: Accounting for the New Zealand Emissions Trading Scheme” (2011) Ernst and Young at 9. []
  112. ITA 2007, s EB 2. []
  113. ITA 2007, s EW 5; Inland Revenue Department “New Legislation: Climate Change Response (Emissions Trading) Amendment Act 2008” (2008) 20(9) Tax Information Bulletin 9 at 10. []
  114. Ernst and Young, above n 110, at 9. []
  115. ITA 2007, ss CX 51B and CX51C []
  116. Ernst and Young, above n 110, at 6 []
  117. At 7. []
  118. At 10 []
  119. Goods and Services Tax Act 1985 [GST Act 1985], ss 11B(1B) and 11B(1C). []
  120. GST Act 1985, s 11A(1). []
  121. GST Act 1985, s 11A(1)(s []
  122. GST Act 1985, s 11A(1)(t). []
  123. GST Act 1985, ss 11(1)(o) and 11A(1)(u). []
  124. GST Act 1985, ss 11(1)(o) and 11A(1)(u). []
  125. GST Act 1985, s 11A(1)(w). []
  126. Higgins and Lewers, above n 107, at 61; Inland Revenue Department “Emissions Trading Scheme Amendments – GST” 23(1) Tax Information Bulletin 90 at 90; Wilkinson and Lui, above n 107, at 463. []
  127. CCRA 2002, s 10 []
  128. CCRA 2002, s 10 []
  129. Climate Change Response Amendment Act 2011. []
  130. CCRA 2002, s 18 []
  131. CCRA 2002, s 18. []
  132. CCRA 2002, s 18. []
  133. CCRA 2002, s 18A. []
  134. CCRA 2002, s 18B []
  135. Climate Change (Unit Register) Regulations 2008, reg 3. []
  136. Climate Change (Unit Register) Regulations 2008, reg 15 []
  137. Climate Change (Unit Register) Regulations 2008, reg 3. []
  138. Nathan v Dollars and Sense Ltd [2008] 2 NZLR 557 (SC); Adrian Macey, Greg Milner-White and Diana Collie Emissions Trading Scheme – Where are We Now? (Continuing Legal Education, Auckland District Law Society, 2010) at 18; Climate Change (Unit Register) Regulations 2008, reg 15(5 []
  139. CCRA 2002, s 54. []
  140. CCRA 2002, sch 3. []
  141. CCRA 2002, sch 4. []
  142. Nolan, above n 30, at 1059. []
  143. At 1059; CCRA 2002, s 219 []
  144. CCRA 2002, sch 4 pt 3. []
  145. CCRA 2002, s 30G; Climate Change (General Exemptions) Order 2009; Climate Change (Oceana Gold (New Zealand) Limited) Exemption Order 2009; Climate Change (The New Zealand Refining Company Limited) Exemption Order 2009. []
  146. CCRA 2002, s 56. []
  147. CCRA 2002, s 61 []
  148. CCRA 2002, s 62(c). []
  149. CCRA 2002, s 62. []
  150. CCRA 2002, s 63. []
  151. CCRA 2002, s 61(1)(b). []
  152. CCRA 2002, s 64. []
  153. CCRA 2002, s 62(1)(c). []
  154. CCRA 2002, s 62. []
  155. CCRA 2002, s 66 []
  156. CCRA 2002, s 65(1). []
  157. CCRA 2002, s 118. []
  158. CCRA 2002, s 75; Climate Change (Pre-1990 Forest Land Allocation Plan) Order 2010 []
  159. CCRA 2002, s 76; Climate Change (Fishing Allocation Plan) Order 2010 []
  160. CCRA 2002, s 77(1 []
  161. CCRA 2002, ss 77(5) – 77(7). []
  162. CCRA 2002, s 77(3). []
  163. Cameron, above n 67, at 277. []
  164. CCRA 2002, s 80(1). []
  165. CCRA 2002, s 161A(3)(a)(i). []
  166. CCRA 2002, s 161A(3)(a)(ii []
  167. CCRA 2002, s 161F(2). []
  168. CCRA 2002,s 161D. []
  169. CCRA 2002, s 161D(7). []
  170. CCRA 2002, s 161A. []
  171. CCRA 2002, s 81. []
  172. CCRA 2002, s 82(2). []
  173. CCRA 2002, s 86. []
  174. CCRA 2002, ss 86B and 144. []
  175. CCRA 2002, s 86C. []
  176. CCRA 2002, s 85. []
  177. Climate Change (Unit Register) Regulations 2008, reg 9-10. []
  178. Climate Change (Unit Register) Regulations 2008, reg 11. []
  179. CCRA 2002, s 20. []
  180. CCRA 2002, s 22. []
  181. CCRA 2002, s 22. []
  182. CCRA 2002, s 24. []
  183. CCRA 2002, ss 10(2)(a)(i) and 12. []
  184. CCRA 2002, s 18C []
  185. CCRA 2002, s 18CA(3) and (4). []
  186. CCRA 2002, s 18CA(1). []
  187. CCRA 2002, s 18CA(2). []
  188. CCRA 2002, s 18CA(5). []
  189. CCRA 2002, ss 30B-30D. []
  190. CCRA 2002, s 192 []
  191. CCRA 2002, s 187(1). []
  192. CCRA 2002, s 195. []
  193. CCRA 2002, s192(2). []
  194. CCRA 2002, s 194(2). []
  195. Cameron, above n 67, at 440; CCRA 2002, ss 188(2)(c), 193(3)-(4) and 193(1). []
  196. CCRA 2002, s 191(1)-(2). []
  197. CCRA 2002, s 94(1). []
  198. CCRA 2002, s 95. []
  199. CCRA 2002, s 96. []
  200. CCRA 2002, s 100 []
  201. CCRA 2002, s 101. []
  202. CCRA 2002, s 129-133. []
  203. CCRA 2002, s 120. []
  204. CCRA 2002, s 121. []
  205. CCRA 2002, s 134(2)(b). []
  206. CCRA 2002, s 134(2)(a). []
  207. Durrant, above n 19, at 67. []
  208. Cameron , above n 67, at 405. []
  209. Crimes Act 1961, ss 218, 228 and 249. []
  210. CCRA 2002, s 13. []
  211. SA 1978, s 2, definition of “chattel”; PPSA 1999, s 16 definition of “investment security”. []
  212. CCRA 2002, s 15. []
  213. Cynthia Hawes “Tortious Interference with Goods in New Zealand: The Law of Conversion, Detinue and Trespass” (Phd Thesis, University of Canterbury, 2010) at 119-120 and 234. []
  214. OBG Ltd v Allan [2007] 4 All ER 545 (HL) at [99]. []
  215. At [102]-[105]. []
  216. CCRA 2002, s 29 []
  217. New Zealand Bankers’ Association “Code of Banking Practice” (4thed, 2007) at 32-37 ; Roger Clarke and Alana Maurushat “Passing the Buck: Who Will Bear the Financial Transaction Losses from Consumer Device Insecurity” (2007) 18 J L Inf & Sci 8 at 10. []
  218. PPSA 1999, s 16, definition of “investment security”. []
  219. PPSA 1999, s 18(1A)(e []
  220. Cameron, above 67, at 444; PPSA 1999, s 18(1A); Climate Change (Unit Register) Regulations 2008, reg 18-19. []
  221. Climate Change (Unit Register) Regulations 2008, reg 19. []
  222. PPSA 1999, s 48 []
  223. Cameron, above n 67, at 445. []
  224. SA 1978, s 5 []
  225. SA 1978, s 2, definition of “chattel”. []
  226. SMA 1988, s 37(1), definition of “commodity”. []
  227. SMA 1988, s 37(1)(a) and (b), definition of “futures contract”. []
  228. Cameron, above n 67, at 421. []
  229. Ernst and Young, above n 110, at 10 []
  230. ITA 2007, s CB 36(2). []
  231. ITA 2007, s CH 1(4); Inland Revenue Department “Other Policy Matters: Tax Treatment of Transactions in Emissions Units” (2009) 21(8) Part II Tax Information Bulletin 94 at 95. []
  232. ITA 2007, s ED1. []
  233. ITA 2007, s DB 60. []
  234. ITA 2007, s CB 36(4). []
  235. Inland Revenue Department “Other Policy Matters”, above n 231, at 95. []
  236. Gehring and Streck, above n 55, at 10230. []
  237. Ben Nevis Forestry Ventures v Commissioner of Inland Revenue [2009] 2 NZLR 289 (SC). []
  238. Commissioner of Inland Revenue v Penny and Hooper [2010] NZCA 231 at [162]. []
  239. Penny and Hooper v Commissioner of Inland Revenue [2011] NZSC 95 at [47]. []
  240. CCRA 2002, s 18D. []
  241. CCRA 2002, s 159. []
  242. Receiverships Act 1993. []
  243. Companies Act 1993. []
  244. Insolvency Act 2006. []
  245. CCRA 2002, s 159. []
  246. CCRA 2002, s 159(3). []
  247. Insolvency Act 2006, s 3, definition of “property”; Companies Act 1993, s 2; Receiverships Act 1993, s 2.
    PPSA 1999, s 16, definition of “emissions units”; SA 1978, s 2; SMA 1988, s 37. []
  248. PPSA 1999, s 16, definition of “emissions units”; SA 1978, s 2; SMA 1988, s 37. []
  249. SMA 1988, s 37, definition of “commodity”. []
  250. SA 1978, s 2, definition of “chattel”. []
  251. ITA 2007, s EB 2. []
  252. GST Act 1985, s 11(1)(o). []
  253. SA 1978, s 5. []
  254. ITA 2007, s YA1. []
  255. SMA 1988, s 37, definition of “commodity”. []
  256. PPSA 1999, s 16, definition of “investment security”. []
  257. ITA 2007, s EW 5. []
  258. ITA 2007, ss CD44(18), BD1 and CX 51B – CX51C. []
  259. GST Act 1985, ss 11A(1)(s)- 11A(1)(w). []