On 17 March 2021, the New Zealand ETS (NZ ETS) held its first allowance auction. In this first round of auctions, all 4.75 million allowances on offer were sold at a clearing price of NZD 36.00 (USD 25.90). There were 40 participants that bid for a total of 11.6 million units, with 30 participants successfully procuring units.  

Auctions will be held quarterly, with the total amount of allowances split evenly across auctions. They will be operated by the New Zealand Exchange (NZX), together with the European Exchange (EEX), which runs auctions for the European Union Emissions Trading System (EU ETS). The auctions are key element of the recent NZ ETS regulatory reforms now being implemented. The government has yet to decide how the proceeds of the auctions will be invested.

The auctioned New Zealand Units (NZUs) may still be used for the 2020 compliance period, which concludes at the end of March. For the 2020 compliance period, participants also still have the option of buying allowances from the government at a fixed price of NZD 35 (USD 22.70). Once 2020 compliance has been completed, the fixed price option will be replaced by a Cost Containment Reserve (CCR), designed to release extra allowances for auction when secondary market prices rise above NZD 50 (USD 32). The trigger price of the CCR will increase by 2% each year to counter inflation effects.

Guest post from ICAP