New Zealand's government should consider increasing auction volumes under the local Emissions Trading Scheme (ETS), as the existing surplus of carbon units has fallen faster than expected, the country's Climate Change Commission (CCC) said today.
The CCC estimates 30.5mn New Zealand Units (NZUs) could be available for auctions over 2026-30, 13.6mn more than previously forecast, it disclosed on 23 April in its annual advice report to the climate change minister.
The difference is mainly because the 2024 auctions did not sell all units available, and to lower industrial allocation forecasts because of plant closures, lower production and updated baselines, as well as other factors, the CCC said. This has prompted the commission to recalculate its central estimate to a surplus of 50.2mn units as of the end of 2024, down from the previous estimate of 68mn as of September 2023.
The government could readjust auction volumes over 2026-30, but the commission recommends the excess units to be "backloaded" over 2028-30, with a preferred option to auction 7mn in each of those three years, compared with the current schedule of 3.3mn for 2028, 2.4mn for 2029 and 1.7mn for 2030. Volumes are scheduled at 5.2mn for 2026 and 4.3mn for 2027 (see table).
Total private unit holdings in the New Zealand ETS registry, also known as the stockpile, fell to 150.4mn at the end of 2024 from 160.8mn the year before. This reflects that more NZUs have been surrendered for emissions liabilities over the past year than have been allocated into the market through auctions, industrial free allocation and forestry activities, the CCC noted.
Price settings should not change
The commission has also recommended that price control settings — the auction reserve price, or floor, and the cost containment reserve, or ceiling — remain as they are, only adjusting for inflation. The auction price floor is currently set at NZ$68 ($40.75) in 2025, NZ$71 in 2026, NZ$75 in 2027, NZ$78 in 2028 and NZ$82 in 2029, while the ceiling price — which triggers additional reserve volumes under the auctions — ranges between NZ$193-235 over that same period.
NZU spot prices in the secondary market have been hovering just above NZ$50 in recent days, far below the 2025 auction price floor. Two of the four quarterly auctions of 2024 failed to clear as prices in the secondary market were lower than the NZ$64 floor last year.
Prices around or above the current NZ$68 auction floor are needed to support gross emissions reductions in New Zealand, the CCC said, noting "a range of evidence" indicating that.
The government will now need to consider the advice and conduct public consultation before making decisions in time for the regulations to be updated by 30 September this year and come into force on 1 January 2026. The government last year decided to more than halve auction volumes over 2025-29, mostly following the CCC's advice.
| NZU auction volumes and proposed updates | mn units | ||||
| 2026 | 2027 | 2028 | 2029 | 2030 | |
| Current auction volumes | 5.2 | 4.3 | 3.3 | 2.4 | 1.7 |
| Proposed updates | 5.2 | 4.3 | 7 | 7 | 7 |
| Source: Climate Change Commission | |||||
