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Summary
- NZ’s first auction of emission allowances happened on 17 March.
- 7 million units were sold in NZ’s first carbon auction.
- The NZ government made changes to auction process in 2020 as it introduced a cap on total emissions within Emissions Trading Scheme.
The first emissions trading scheme auction was conducted on 17 March. The first carbon auction, in which 40 participants took part, sold all 4.75 million units for $36 each.
Bidders submit a single bid at their preferred price under the scheme. All bids are then rated from highest to lowest price, with the lowest effective bid price acting as the auction's clearing price. Uniform price applies to all bidders must pay this same clearing price, regardless of the price on their initial bid.
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The auctioning of New Zealand Units (NZUs) was launched through the NZ Emissions Trading Scheme (ETS) to bring into line the supply of units in the scheme with NZ emission reduction targets.
It requires participants to give up emission units to the government to contain pollution for which they are responsible. The implementation of a limit on cumulative pollution permitted within the ETS was one of the reforms introduced to the system last year.
A significant step by government to address climate crisis
Minister for Climate Change, James Shaw, stated that NZ had reached a significant breakthrough in its transition to a low-carbon future. Reforming NZ Emissions Trading Scheme was one of the most important moves the NZ government took to resolve the climate crisis, as per him.
The government converted ETS into one of the most successful instruments NZ has for lowering climate-polluting emissions after having acquired a scheme that was struggling to reduce emissions.
Shaw noted that a crucial part of these reforms was assigning a part of each year’s allowances via auction. Auctioning will assist in this by converting the government’s goals into a price signal, which encourages investment in low-carbon technology.
The major concern that remains is if businesses adapt to new changes quickly. Auction can help the country eliminate the ill effects of climate crisis by building a zero-carbon future.
The government expects 19 million NZUs to be auctioned in 2021, which are spread evenly across 4 scheduled auctions. A maximum volume of 26 million NZUs could be available in 2021. Next carbon auction is scheduled for 23 June 2021.
