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Government announces updated NZ ETS auction settings

New Zealand Emissions Trading Scheme (NZ ETS) auction settings have been updated for the years 2023 – 2027. Unit supply settings are now aligned with emissions budgets and price control settings are adjusted for inflation.

Under the NZ ETS, businesses that emit carbon must surrender an emissions unit for every tonne of pollution they emit. NZ ETS participants purchase 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 carbon credits held in the cost containment reserve. This system helps prices stay within an acceptable range.

Updates to NZ ETS auction controls

Cost containment reserve volumes will be aligned with emissions budgets and will no longer contain any emissions additional to emissions budgets. From 2023, the number of units withheld from auctions will be further reduced to encourage drawdown of the stockpile. The stockpile of approximately 159 million privately held units (as at Sept 30) poses a threat to the stability of the market and the achievement of emission budgets.

The existing NZ ETS price control settings for 2023 through to 2026 will be adjusted to take into account higher-than-anticipated inflation, and now include settings for 2027.

Auction volumes and Price control settings for NZ ETS auctions – 2023 – 2027

 

2023

2024

2025

2026

2027

PREVIOUS: Auction volume (in millions)

18.6

18.0

16.5

15.7

 

NEW: Auction volume (in millions)

17.9

17.1

15.3

13.5

11.7

PREVIOUS:  Reserve price (per unit)

$32.10

$34.35

$36.75

$39.32

 

NEW: Reserve price adjusted for inflation (per unit)

$33.06

$35.90

$38.67

$41.45

$44.35

PREVIOUS: Trigger price (per unit)

$78.40

$87.81

$98.34

$110.15

 

NEW: Trigger price adjusted for inflation (per unit)

$80.64

$91.61

$103.24

$115.84

129.97

PREVIOUS: CCR Volume (in millions)

7.0

7.0

6.8

6.7

 

NEW: CCR Volume (in millions)

8.0

7.7

7.2

6.5

5.9

Changes to the unit supply and price settings will operate from the first NZ ETS auction of 2023 on 15 March, 2023.