New Zealand: the last ETS allowance auction in 2023 failed to clear
On 6 December 2023 the New Zealand NZU auction produced no winners: bids were below the reserve price of NZD 60, and 15 million units (23 million together with the CCR reserve) were not sold.
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The last auction of NZU units in the New Zealand emissions trading scheme in 2023 was rejected because bids did not reach the reserve price. 15 million units were offered (according to the Ministry for the Environment (MfE) monitoring report 23 million in total, together with 8 million from the cost containment reserve), with a reserve price of 60 New Zealand dollars. According to interest.co.nz, buyers submitted bids for about 3.6 million units, and the auction operator found there were no successful bids. Unsold units go to the next auction in the same year but not to the following year, which means the annual pool is cancelled.
How the auctions work
In the New Zealand ETS the government sells some NZU units at quarterly auctions. A reserve price (auction reserve price) and a cost containment reserve mechanism were introduced. If all bids are below the reserve price, the auction does not clear. The government decided that unsold units are not carried over to the next year.
Why the auctions failed
An auction fails to clear when bid prices do not reach the reserve price, and in addition the operator applies a confidential reserve price set above the threshold (the Ministry for the Environment). The reserve price in 2023 rose to NZD 60 (from NZD 33.06 according to Argus), and all four auctions of the year ended without a result.
Why the ETS matters for waste and biogas
Landfills participate in the NZ ETS and bear the cost of allowances for emissions, so capturing methane reduces their liabilities. NZU prices therefore affect the profitability of landfill gas and waste projects. Agriculture, the main source of methane, remains outside the ETS, which limits the scope of the market for agricultural biogas.
What this means for Poland and Europe
The EU ETS has a more elaborate stabilising mechanism (the market stability reserve). The NZ example shows that even well-designed auctions can fail if price parameters do not match market expectations. For methane reduction projects based on carbon credits – increasingly analysed in Poland – the stability of the allowance price is as important as its level.
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