New Zealand Carbon Prices Jump to 5-Month High on Overhaul Plan

(Bloomberg) -- New Zealand carbon prices surged after the government announced plans to overhaul the national trading system, which has been in limbo due to persistent oversupply. 

The spot price of carbon units climbed as much as 9% to NZ$61 ($37) a ton Tuesday, the highest since March. The government plans to more than halve the number of units to 21 million from 45 million between 2025 and 2029 to stimulate businesses to reduce emissions. 

“This is a positive move for carbon markets and for the climate,” said Rich Gilmore, chief executive officer of investment manager Carbon Growth Partners. “It will drive higher carbon prices, which creates a stronger incentive for decarbonization in a way that gives affected companies time to respond.”

The move is expected to stimulate the market, which has failed to work efficiently over the years due to a lack of clarity over government reform plans. New Zealand has failed to sell carbon units at most of its quarterly auctions, and prices have slumped more than 10% this year after losing almost 10% in 2023.

An oversupply held by market participants has contributed to the decline in prices, and led to the failure of recent auctions, New Zealand Climate Change Minister Simon Watts said in a statement Tuesday. 

The changes will take effect from the first auction of 2025, according to the statement. New Zealand will retain the current floor price, cost containment reserve price and reserve volumes in its emissions trading scheme, it said. 

“Given the auction forward curve supply was reduced more than the market expected, we anticipate New Zealand Units to gradually trend higher from 2025,” said Logan MacLeod, a director and head of New Zealand Commodities at investment bank Jarden Group Ltd. 

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