New Zealand's carbon allowance unit prices plunge to 18-month low


Prices of New Zealand Units, or NZUs, the country's emission trading carbon allowance unit, dropped to 18-month lows March 24 after a short-lived jump from a failed auction on March 15, while uncertainty over regulatory changes to the system cast a pall on the market, according to S&P Global Commodity Insights.

Platts assessed NZUs at NZ$62.60/mtCO2e ($38/mtCO2e) March 24, an 8% dip from March 15 when it was assessed at NZ$68.10/mtCO2e, S&P Global data showed. The market saw a sudden spike in buying on March 15 after no bid cleared minimum required levels at the first auction for the year, forcing obligatory buyers to look for units in the secondary market.

Despite government’s announcement on March 22 to conduct a review of its emissions trading scheme to explore policies that drive more carbon abatement at sources of pollution, compared with removing carbon through forestry credits, that did not have any positive effect on prices.

"Seems that no one has confidence in the government, despite the review saying it would look to tighten the ETS," a Wellington-based carbon trader said.

A second Wellington-based carbon broker echoed the sentiment saying that things were not looking promising when it came to reassurance from the government's side.

"The NZU is a very confidence-driven market. Unless the govt restores that, we could spend a long time at these levels," the carbon broker said about prevailing price levels.

After the market hit its indicated peak of NZ$88.50/mtCo2e on Nov. 16, 2022, the NZU price has fallen by about 30%.

The government okayed significantly weaker price settings for the ETS in December 2022 compared with recommendations from the Climate Change Commission (CCC), which triggered the fall in NZU prices late last year.

NZUs remain Asia's high-cost carbon price and among the highest in the world. The CCC estimated that a far higher price is needed to decarbonize the economy.

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