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Forestry and the Emissions Trading Scheme

ETS Auction No.3 – 1 September 2021

The Government held its third auction of NZUs at the start of this month, and there was a lot of action! The auction clearing price of $53.85 saw all 4.75 million units sold, but also saw the Cost Containment Reserve made available due to the trigger of $50 being exceeded. All 7 million additional CCR reserve units were also sold at the clearing price.

The auction resulted in a whopping $632.75 million in revenue for the Government, but there is now one more auction left in December with no CCR units left. In 2022 there will be a fresh CCR available, but only if clearing prices reach the new trigger of $70

Price update

Immediately prior to the 1 September auction, spot NZU pricing was around $51.50 - $52.00. The auction cleared well above this, but the spot market reacted swiftly…. by close of business on auction day the spot market had moved to $59.00, up 13% from the opening. No doubt there was some profit-taking by those speculators who were successful at auction, but perhaps also some compliance purchases that missed out at auction and looking to secure volume quickly in response.

Since the auction, we have seen prices rise further to a high of $65.80. Recent days have seen a check back and some more volatility, with units trading a range of $62.00 - $64.00. Where will it go from here? And how quickly will it move? These are the questions on many minds right now.