New Zealand Emissions Trading Scheme (NZ ETS) auction settings have been updated for the years 2023–2028. This includes a reconsideration of settings decisions made last year, following settlement of a recent judicial review. As a result, auction settings for December 2023 will be changed.
Under the NZ ETS, people carrying out certain activities that lead to emissions, like mining coal, must surrender an emissions unit for every tonne of pollution that results. They can buy these units through Government auctions or on the secondary market.
Auction price controls comprise the reserve price (lower price control) and the trigger price (upper price control). The trigger price, if reached in an auction, releases a volume of emission units held in the cost containment reserve. This system helps prices stay within an acceptable range.
Starting from the December 2023 auction, the number of emissions units available at auction will be reduced. This reduction will support Aotearoa New Zealand’s ability to achieve its emissions budgets and international climate change commitments.
The auction floor and cost-containment reserve trigger prices will rise significantly to create a wider price corridor. Auction price floor settings will rise from the current level of $33.06 to $60 in December 2023. It will be $64 in 2024.
A two-tier cost containment reserve (CCR) trigger price will be introduced. In December 2023, the CCR trigger price will be $173 rather than current trigger price of $82. While there will be two CCR trigger prices in that auction, the full CCR volume will be allocated to the first tier, with none in the second. The CCR trigger price manages the risk of extremely high prices in the NZ ETS from shocks and unforeseen events and is supposed to be rarely met in auctions, if at all.
In 2024, the total CCR volume will decrease from 8 million NZUs under the current settings to 7.7 million NZUs, and will continue decreasing in the following years. From 2024, the total volume will be split between two tiers. The first tier volume will be much smaller than the second, and available at a lower trigger; however, the trigger price for both is significantly higher than under the current settings (ie, in 2024, 2.8 million units could be released at the tier-one trigger price of $184 and a further 4.9 million units could be released at $230).
Following public consultation and Government decisions, the final NZ ETS limits and price control settings for units have been updated.
See Annual updates to emission unit limits and price control settings for the updated information