Carbon Match: Carbon Market Update

Wednesday 1 Sep 2021

(OPINION: Lizzie Chambers, Managing Director, Carbon Match) Brave Today or Take Your Chances Next Week? – Last week on Monday saw a frenzy of activity as NZUs surpassed the $50 mark for the first time.

That was in the wake of a Government announcement confirming updates to ETS settings that take effect for the 2022 calendar year. In particular, the trigger price for the Cost Containment Reserve at auctions will go from $50 to $70 for calendar year 2022 and rebase upwards by 10% p.a. plus inflation thereafter.

We continue to see some strong buyer interest on the board, although sellers appear hesitant just at the moment, and today's offers on Carbon Match have made for slim pickings, natural enough just a few days out.

All eyes are on the upcoming auction today, even more so following MfE's Monday announcement, which most in the market seem to have expected to come after the next auction was settled.

What will happen? We won't make predictions but all we can say is the obvious - with spot NZUs now bid $51 and strong buying interest, the likelihood that the interim clearing price at next week's auction will hit or surpass the $50 CCR trigger price certainly went up since this time last week.

The March and June auctions were fully subscribed, and spot NZUs have continued to strengthen month on month. The cost containment reserve of 7 million tonnes cannot roll forward past the December auction. If it lasts that long.

While the June auction monitor report, only recently released, showed an 87.5% increase in the average volume won per bidder, it also showed a 53% decrease in the number of successful participants in comparison to the first auction.

Indeed, the inaugural March auction saw 30 out of 40 participants successful in attaining at least some volume. By contrast, the June auction saw 21 out of 37 buyers left out in the cold. In auction no 1 (March), successful bids appeared to be distributed equally between compliance and non- compliance buyers, whereas for the June auction, those with a compliance obligation accounted for just 37.5% of successful interest.


2:40pm News Update: Carbon prices crash above ceiling. - Click here to see today's carbon auction news from BusinessDesk

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