Salt Carbon Fund - short term pain, potential long term gain

Climate Change Minister James Shaw has announced that from December the government will raise the reserve price for carbon units (NZUs) auctioned under the ETS from $33 to $60. It will also raise trigger prices for the cost containment reserve in the ETS from $82 to $173, and lower the cap on the number of units that can be auctioned over the next five years.

This will result in 17.6 million fewer units to be auctioned over the next five years making NZU holders use up their stockpiles over time.

The market for carbon units weakened at the end of last year when the government ignored the CCC’s December advice to raise prices to a level which would discourage carbon emissions. A lack of buying by emitters and additional supply from forest owners further depressed the price.

However following a successful legal challenge by Lawyers for Climate Action NZ two weeks ago, the High Court ordered the government to reconsider its position, resulting in yesterday’s announcement.