Update on the Confidential Reserve Price Methodology for NZ ETS Auctions
The Government offers for sale a set number of New Zealand Units (NZUs) as part of the New Zealand Emissions Trading Scheme (NZ ETS) at auction four times a year.
NZX Ltd, as the auction operator, uses a methodology set by the Minister of Climate Change to calculate the Confidential Reserve Price (CRP) at each auction. The purpose of the CRP is to prevent sales by auction at prices significantly below the prices of NZUs being sold at the time in other ways (such as on the secondary market). This is so sales by auction do not unduly affect secondary markets.
The methodology for calculating the CRP was reviewed following the 6 December 2023 NZ ETS auction. A decision was made to change the methodology because it had not been updated since auctions began in 2021 and a change was appropriate to preserve its confidentiality.
The review was conducted in accordance with regulations 15A and 15B of the Climate Change (Auctions, Limits, and Price Controls for Units) Regulations 2020, which require a review of the methodology used to set the CRP each time a NZ ETS auction does not clear. These regulatory requirements ensure that the methodology continues to promote the purpose of the CRP.