On 18 June 2025, the New Zealand Government conducted the second New Zealand Units (NZUs) auction of the calendar year, offering a total of 3,000,000 units - comprising 1,500,000 scheduled for the June auction and a further 1,500,000 rolled over from March's unsold volume (excluding CCR volumes). The auction featured a floor price of $68.00 per NZU. Given the prevailing secondary market price of $59.00/mtCO₂e and a three-month simple average of $54.85/mtCO₂e, the market widely anticipated an unsuccessful outcome. As expected, no bids were received at or above the reserve price, resulting in all units remaining unsold. These will roll over into the next auction on 10 September 2025, where 4,500,000 units will be available, again with a $68.00 floor.
About the NZ ETS:
The New Zealand Emissions Trading Scheme (NZ ETS), established under the Climate Change Response Act 2002 (CCRA), operates through a quarterly auction system where participants submit sealed, confidential bids for NZUs. These auctions follow a uniform-price format, meaning all successful bidders pay the same clearing price set at the lowest accepted bid required to exhaust the available volume.
Each quarterly NZU auction operates under a known Auction Reserve Price (ARP), a publicly disclosed minimum price at which units can be sold. In addition to this, the auction also includes a Confidential Reserve Price (CRP), which acts as a secondary price floor to ensure units are not cleared below an undisclosed, market-aligned threshold. The CRP is typically benchmarked against prevailing secondary market prices, with adjustments made for market volatility and other proprietary considerations.
Quarterly auction volumes are set in advance and spread evenly over the year. If insufficient bids are submitted at or above the CRP, or the full volume is not taken up, the unsold units roll forward to the next scheduled auction within the same calendar year. However, any NZUs that remain unsold at year-end are permanently removed from circulation, tightening futuresupply.
In the 2024 annual ETS settings update for the 2025–2029 period, the New Zealand Government announced a significant tightening of future NZU supply, with total auction volumes set to be reduced from 45 million to 21million units over the 2025–2029 period. The move is designed to accelerate emissions reductions by strengthening carbon price signals and incentivising businesses to decarbonise more rapidly.
Key takeaways:
Price corridor extended: The existing price controls - including the Auction Reserve Price and Cost Containment Reserve (CCR) trigger - have been extended, with only minor adjustments for inflation. This continuity is broadly supportive of medium to long-term NZU price stability and confidence in the market.
Material supply reduction: The government has sharply cut forward auction volumes. This supply tightening is expected to be price supportive, with final settings (highlighted in orange in the accompanying chart) now below the Climate Change Commission's prior advice. While this was a structurally bullish development, its effect on the secondary market is likely to be gradual, as reflected in current spot pricing below the auction floor levels.
