A significant milestone in New Zealand’s transition to a low carbon future was reached today with the first auction of emissions allowances, said the Minister for Climate Change, James Shaw.
“One of the most significant steps our Government has taken to address the climate emergency was to reform New Zealand’s Emissions Trading Scheme. Having inherited a scheme that was failing to cut emissions, we turned the ETS one of the most effective tools New Zealand has for reducing climate-polluting emissions.
“Allocating a portion of each year’s allowances via auction was key part of these reforms. Auctioning is a simple, transparent and credible process that will help to incentivise New Zealand’s biggest polluters to invest in the transition to a clean, climate-friendly economy.” James Shaw said.
Completed this morning, 40 participants took part in the auction. A total of 4.75 million New Zealand units were sold at a price of $36.00 per unit.
Auctioning is a way of allocating units under the ETS and was introduced as part of the changes the Government made to the scheme last year. The process works by making a proportion of units (consistent with the cap on the ETS) available for purchase through a single round of auctioning, during which bidders submit a single bid at their preferred price.
“One of the best ways to support long-term investments in climate-friendly technologies is by ensuring the price of pollution in Aotearoa is consistent with meeting our obligations under the Paris Agreement and New Zealand’s own emission reduction targets.
“Auctioning will help to achieve that by translating the targets we have put in place into a price signal that drives much-needed investment into low carbon technologies,” James Shaw said.
New Zealand’s Emissions Trading Scheme requires participants to surrender emission units to the government to cover the pollution for which they are liable. Among the changes made to the scheme last year was the introduction of a cap on the total emissions allowed within the ETS.
“The question is not whether New Zealand will transition to a low carbon economy, but whether businesses can respond quickly enough. Auctioning helps to answer to that question by making clear that we can change, that we can do things differently and that we can avoid the worst impacts of the climate crisis and build a zero carbon world that meets the needs of every New Zealander,” James Shaw said.
A brief explanation of how the auctioning process works is attached for information.
Auctioning is a way of allocating units under the Emissions Trading Scheme (ETS). It has been introduced as part of the ETS reforms that were passed by Parliament last year.
The number of units sold at each auction will be consistent with NZ’s emissions budget and the number of free allowances that have been allocated.
Units are sold to emitters through a single round, sealed bid, uniformly priced auction. Bidders submit a single bid at their preferred price.
All bids are then ranked in order from highest to lowest price and the clearing price for the auction is the lowest successful bid price. All bidders then pay this clearing price regardless of what price was on their original bid.
Over the course of 2021, a total of 19 million New Zealand Units will be auctioned through the NZ ETS. The availability of these units will be spread evenly across the four scheduled auctions for 2021.
NZ ETS auctions are being jointly operated by NZX and EEX – the European Energy Exchange. The first auction kicked-off this morning at 9am and closed at midday.
Media contact: Danny Stevens 021 829 206