Concept produces carbon price projections using its whole-economy model, ‘ENZ’ – Emissions-Economy New Zealand.
ENZ is a comprehensive tool designed to project and analyse the economic and greenhouse gas emissions outcomes for the different sectors of the New Zealand economy. Built by Concept to examine the dynamics driving emissions and economic activities, ENZ models the interplay between emissions-producing decisions - such as land-use changes, technology adoption, and energy demand - and external drivers like commodity prices and policy settings. The model integrates feedback loops between economic activities and emissions, using a dynamic, recursive approach. It provides insights up to 2075, accounting for long-term policies such as New Zealand’s net-zero 2050 goals.
ENZ has been used extensively to provide analysis and insights to government agencies and market participants on a range of issues, including policy evaluation and market forecasting – not just for emissions but also for the electricity, gas, and forestry sectors. It has been used to inform New Zealand’s second Emissions Reduction Plan (ERP2) and advice by the Climate Change Commission.
Our price forecasts are revised quarterly and come with an associated report that details the key issues driving outcomes, including any deep dive analysis of a particular topic of relevance for that quarter. Purchasers of the report are also entitled to a 1-hour session with the report’s authors to discuss the projections.
The report is available on a four-quarter subscription basis, or parties can make one-off purchases. For more information, contact Simon Coates or Yvonne Matthews.
ENZ is a comprehensive tool designed to project and analyse the economic and greenhouse gas emissions outcomes for the different sectors of the New Zealand economy. Built by Concept to examine the dynamics driving emissions and economic activities, ENZ models the interplay between emissions-producing decisions - such as land-use changes, technology adoption, and energy demand - and external drivers like commodity prices and policy settings. The model integrates feedback loops between economic activities and emissions, using a dynamic, recursive approach. It provides insights up to 2075, accounting for long-term policies such as New Zealand’s net-zero 2050 goals.
ENZ has been used extensively to provide analysis and insights to government agencies and market participants on a range of issues, including policy evaluation and market forecasting – not just for emissions but also for the electricity, gas, and forestry sectors. It has been used to inform New Zealand’s second Emissions Reduction Plan (ERP2) and advice by the Climate Change Commission.
Our price forecasts are revised quarterly and come with an associated report that details the key issues driving outcomes, including any deep dive analysis of a particular topic of relevance for that quarter. Purchasers of the report are also entitled to a 1-hour session with the report’s authors to discuss the projections.
The report is available on a four-quarter subscription basis, or parties can make one-off purchases. For more information, contact Simon Coates or Yvonne Matthews.
How ENZ works
ENZ is best described as a hybrid, dynamic recursive model with bottom-up economic and emissions projections. ENZ projects sectoral outcomes by incorporating price signals, policy settings, and economic feedback loops. The model includes endogenous decision-making in some areas (e.g., fuel switching, land-use decisions) but does so at an aggregate rather than an individual agent level. However, it does selectively apply unit-level modelling for key industrial emitters that are large enough to significantly affect emissions. It is best classified as a national-level policy model that incorporates elements of energy-economy modelling and sectoral emissions forecasting.
ENZ integrates historical data, sub-sector projections, and various assumptions with dynamic modelling processes. Historical data sources are used to establish its baseline conditions. These sources include New Zealand’s Greenhouse Gas (GHG) Inventory, energy and fuel statistics from the Ministry of Business, Innovation and Employment (MBIE), and sector-specific data from government agencies. Historical activity levels such as electricity generation, energy demand, transport usage, waste emissions, and agricultural production also inform the calculation of emissions intensities and efficiencies.
When ENZ is run to model the ETS, it progressively calculates for each future year:
The inherent challenge for this modelling is the strong inter-temporal dynamic for carbon price outcomes: decisions made in a year will have flow-on effects for subsequent years, plus decisions made in any year will be based on expectations of prices for future years. To address this, Concept has developed an iterative algorithm that solves for the carbon price trajectory that delivers the modelling objective – which, for modelling the ETS, is for the NZU stockpile to remain broadly stable at moderate levels.
Concept’s carbon price projections model this dynamic and explore the variation in price outcomes arising from potential variations in future policy settings and ‘states-of-the-world’ (e.g. future land sector commodity prices).
ENZ integrates historical data, sub-sector projections, and various assumptions with dynamic modelling processes. Historical data sources are used to establish its baseline conditions. These sources include New Zealand’s Greenhouse Gas (GHG) Inventory, energy and fuel statistics from the Ministry of Business, Innovation and Employment (MBIE), and sector-specific data from government agencies. Historical activity levels such as electricity generation, energy demand, transport usage, waste emissions, and agricultural production also inform the calculation of emissions intensities and efficiencies.
When ENZ is run to model the ETS, it progressively calculates for each future year:
- The demand for NZUs – being the emissions from activities covered by the ETS, plus any forestry-related surrenders for deforestation or harvesting of forests that use the stock-change accounting approach.
- The supply of NZUs – being the projected units supplied from Industrial Allocation, Forestry removals, and – if the carbon price is higher than the auction reserve price – the auction volumes that are available for that year.
- The decisions made by decision-makers in response to the price signals they are facing, including the carbon price and other commodity and technology prices. Examples include:
- households deciding on an EV or ICE vehicle, or whether to switch from gas heating
- businesses deciding whether to switch away from fossil fuelled industrial boiler heat or (in the case of petrochemicals) whether to exit New Zealand
- electricity generators deciding whether to build renewable stations to displace fossil stations, or choose between coal and gas to fuel fossil stations
- landowners deciding whether to convert land from pastoral farming to forestry, or whether to implement agricultural emissions mitigation technologies.
The inherent challenge for this modelling is the strong inter-temporal dynamic for carbon price outcomes: decisions made in a year will have flow-on effects for subsequent years, plus decisions made in any year will be based on expectations of prices for future years. To address this, Concept has developed an iterative algorithm that solves for the carbon price trajectory that delivers the modelling objective – which, for modelling the ETS, is for the NZU stockpile to remain broadly stable at moderate levels.
Concept’s carbon price projections model this dynamic and explore the variation in price outcomes arising from potential variations in future policy settings and ‘states-of-the-world’ (e.g. future land sector commodity prices).