The ENZ model is a comprehensive tool designed to project and analyse the economic and greenhouse gas emissions outcomes for various 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 ENZ model has been used to inform New Zealand’s second Emissions Reduction Plan (ERP2) and advice by the Climate Change Commission.
ENZ modules, sub-sectors and inter-dependencies
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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.
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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.
How ENZ works
When ENZ is run to model the ETS, it progressively calculates for each future year:
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’ (eg, future land sector commodity prices).
- NZU demand – emissions from activities covered by the ETS, plus any forestry-related surrenders.
- NZU supply – projected units supplied from Industrial Allocation, forestry removals, and (if the carbon price is higher than the auction reserve price) auction volumes that are available for that year.
- Decisions made in response to price signals, 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.
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’ (eg, future land sector commodity prices).
