Climate Change Commission advises no change to NZ ETS settings but flags late-2020s risk

The Climate Change Commission’s routine annual advice on NZ ETS auction settings, recommends keeping auction volumes and price controls the same for now to limit the risk of further price instability and support confidence in the NZ ETS.

This year’s analysis also points to a possible unit shortfall risk by the late 2020s. It’s uncertain if and when a shortfall could happen, but it would likely result in volatile price spikes. The Commission advises the Government to consider and consult on options to mitigate this risk.

Auction settings shape expectations and market confidence, which matters for investment decisions, but they have limited reach – auctioned units are a small share of total units, and the NZ ETS covers less than half of domestic emissions.

The NZ ETS will struggle to provide an investment signal by the mid‑2030s. The Government needs to start a transparent and consultative process to determine how the NZ ETS can best evolve.