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New Zealand’s final carbon auction of 2024 ended with 4,032,500 NZUs sold at a floor price of $64, totalling $258 million in revenue. However, a portion of the units remained unsold, offering a glimpse into the mixed dynamics of the market ahead of the upcoming changes to the Emissions Trading Scheme.
A Mixed Outcome: Revenue vs. Unsold Units
The final carbon auction of 2024 in New Zealand offered 11,125,700 NZUs, but only a portion—4,032,500 units—were sold at $64 each. The 14 million unsold units, which include older stock, will be permanently withdrawn from circulation.
This partial clearance reflects the market’s struggle with high pricing levels and limited demand, but the auction’s $258 million in revenue will support government fiscal initiatives, including tax relief.
Trends and Challenges in the Carbon Market
This year’s carbon auctions in New Zealand have been fraught with hurdles, with some rounds not clearing at all and others selling only partially. The final auction, offering nearly twice the units expected for 2025, added to the market’s difficulties. Nonetheless, secondary trading prices have stayed at the $64 floor, and analysts are optimistic that prices could rise, possibly approaching the increased $68 floor in 2025.
Tightening Supply
Looking ahead, the ETS will see a significant tightening in supply. Only six million units will be made available at each of the four auctions scheduled for 2025, and the minimum price per unit will rise to $68. This reduction in supply, combined with a steady annual demand of approximately 35 million units to meet emissions obligations, is expected to draw down the current stockpile and potentially drive up market prices.
However, uncertainties remain, particularly regarding the contribution of the forestry sector to the carbon market. As a major source of NZUs, the sector’s role in balancing supply and demand will be pivotal in shaping market conditions.
Market Reactions and Future Outlook
New Zealand’s ETS in 2025 will introduce tighter supply conditions, with six million NZUs available at each of the year’s four auctions and a minimum price set at $68.
The cut in supply is expected to deplete the current surplus and potentially drive prices higher, as demand for carbon units continues at around 35 million annually. However, the forestry sector’s contribution to the market remains a variable factor that will influence future market trends.