The New Zealand government’s recent update to the Emissions Trading Scheme (ETS) for 2023 featured significantly lower carbon allowance prices and volumes than recommended by the Climate Change Commission (CCC). The CCC had advised a steep increase in carbon auction prices to align with the country’s climate goals. However, the government’s latest settings were seen as weak by the market. The ETS distributes allowances to covered entities for every metric ton of carbon dioxide equivalent emissions through a mix of free allocations and auctions. The government increased the auction reserve price to NZ$33.06/mtCO2e but lower than the CCC’s recommended NZ$60/mtCO2e. The cost containment reserve (CCR) trigger price was also increased but significantly lower than the CCC’s recommendation of a two-tier price structure of NZ$171/mtCO2e and NZ$214/mtCO2e.
