from Business Desk by Ian Llewellyn | Wednesday, 18 June 2025

The Government’s latest carbon auction again attracted no bidders.

With secondary market price at about the $57/$58 mark and the auction floor price at $68, there was always little chance of New Zealand Units on offer being cleared.

In fact, no one even registered to bid, let alone getting to the bidding stage.

A New Zealand Unit (NZU) is a proxy for one tonne of carbon and used by emitters to settle their obligations under the emissions trading scheme.

Rolling over

There were three million NZUs available at the floor price, of which 1.5 million were rolled over from the first auction of the year, which also failed to clear.

There were more than 10 million NZUs on offer in total, but the vast majority of these were set at minimum trigger levels that were so high in price (known as the cost containment reserve) that they were never in serious consideration by any possible purchasers.

The unsold NZUs will roll over to the next auction in three months’ time. In all there are six million NZUs on offer this year. If they remain unsold at the end of 2025 they will be cancelled and in theory, tighten the supply and reduce the stockpile available to emitters.

Secondary market trading platform Carbon Match noted that since inception in March 2021, there have been 18 NZU auctions held. This auction is the eighth auction to be declined.

NZUs on Carbon Match traded at $58 flat immediately prior to the release of auction results, on small volume.  “$58 is a level not seen since the end of March, but unfortunately, bids at or above the price floor of $68 were required for volume to change hands at today’s Government NZU auction to clear,” Carbon Match told clients. “We have not seen NZUs trade on Carbon Match at $68 since March 2024.” 

Peaks and troughs

Carbon prices peaked at $88.50 in November 2022, but fell following the Labour Government adjusting settings due to fears of the inflationary impact of high carbon prices. Despite settings tightening after that, carbon prices have never recovered.

The Ministry for the Environment is currently consulting on NZU unit limits and auction price control settings, with declined auctions and their effect on market supply, and the structure of auction rollovers being key discussion points.

The ministry said although current secondary market prices are below the current auction price floor, this could be a signal the market is currently oversupplied.

The Climate Change Commission recently recommended considering increasing future NZU auction supply.

The consultation under way includes an option of decreasing supply.

The auction also means less money for the Government, which had planned to use any funds raised to boost the fiscal bottom line.

Before the auction, Jarden, which runs another trading platform, predicted the auction would not clear.

“With satisfactory liquidity continuing to transact in the secondary market below the auction floor price, participants expect the June auction is likely to decline, resulting in the volume rolling over to the September auction. We do not expect a material reaction in the secondary market.”

Another future impact will be the Government’s recently introduced legislation to prevent some farms converting to forestry qualifying for NZUs.