ETS Auctions and how to buy New Zealand Emissions Units (NZUs)

The NZ ETS establishes a trading market of New Zealand emission units (NZUs). Businesses that carry out activities covered by the NZ ETS are required to buy and surrender to the Government, one NZU for every one tonne of carbon dioxide equivalent (CO­2-e) emissions they produce.

NZUs can be traded among businesses participating in the NZ ETS. Supply and demand for NZUs is a key driver of the NZU price.

Buying New Zealand Emissions Units

The price of New Zealand emissions units (NZUs) in the New Zealand Emissions Trading Scheme (NZ ETS) market is based on supply and demand.

The Government sells NZUs directly to the market through auctioning. The number of NZUs to be auctioned are published prior to auctions, and is a sub-limit of the annual overall limit in the NZ ETS.

Other NZUs are available from the secondary market - either through trading platforms or people directly trading with each other.

The Government is now auctioning NZUs

Auctions are managed on behalf of the government by NZX and EEX (the European Energy Exchange).

NZUs at auction are sold to all successful bidders at the same auction clearing price. The clearing price of each auction can be found here on the ETS auctions site.

Four auctions are scheduled for 2021, as shown below:

Date

Volume available*

17 March

4.75 million NZUs

23 June

4.75 million NZUs

1 September

4.75 million NZUs

1 December

4.75 million NZUs

*The Government expects to sell 19 million NZUs in total during 2021, spread evenly across the four scheduled auctions. If an auction clearing price is higher than $50, the cost containment reserve will be triggered allowing up to another 7 million NZUs to be available at that auction. This means the maximum volume of 26 million NZUs could be available in 2021.

If NZUs remain unsold at the end of an auction they will roll-over to the next auction, provided it is in the same calendar year.

For more information on how to participate in NZ ETS auctions please go to the NZ ETS auctions site

Secondary market trading

The NZ ETS secondary market is where most NZUs are traded. The secondary market includes both spot and forward trades.

NZUs can be traded through direct bilateral agreements with buyers, through a broker or through a trading platform. The Government is not responsible for trades on the secondary market, and the secondary market platforms are run independently.

*There are a number of ways that units can be bought on the secondary market. Many trades in the NZ ETS market happen in the spot market, where NZUs are traded for immediate delivery. There are some forward contracts where businesses agree to trade units at a specified price in the future. For more information, visit any of the secondary market trading platforms.

Direct purchase from the fixed price option

The fixed price option (FPO) no longer exists as an option for most NZ ETS participants. The FPO historically allowed participants to pay cash to the Crown rather than surrendering units and acted as a de facto price ceiling.

Foresters may still use the FPO of $35 per unit to meet surrender obligations for the 2020 calendar year. The FPO of $25 per unit remains available for emissions or removals that occurred in the 2019 calendar year or earlier. See Surrendering units [EPA website].