According to the Climate Forestry Association (CFA) the blame for the failure of last month’s Emission Trading Scheme (ETS) auction can be laid squarely at the feet of the Climate Change Commission along with the previous Labour Green Government - reflecting a series of manufactured crises rather than a fundamental issue with the market.

The quarterly ETS auction failed to attract any bids, following a partial clearance of units in March – raising $190 million – and the unprecedented failure of all four auctions in 2023.

CFA Chief Executive, Andrew Cushen, says the continued uncertainty in the market highlights the ongoing impacts of years of meddling.

“What we are seeing play out is a natural response to the regular fiddling with settings, endless reviews and constant changes, which reflected a culture of interference from the Labour Government, the former Minister for Climate Change and the Climate Change Commissioner,” says Mr Cushen.

“Although participants in the market are understandably gun-shy after so long without any clear direction for the ETS, this auction doesn’t affect the fundamentals. At its heart, the ETS is a market mechanism, and it is designed to deal with short-term issues like the ones we’re seeing.

“Despite not clearing today, that shouldn’t mean we lose faith in what is essentially our most successful – and our one-and-only – tool for meeting our climate commitments and reducing our emissions.”

Mr Cushen adds that the Coalition Government couldn’t be clearer that it supports the stable, long-term operation of the ETS in its current form.

“At Fieldays, both Forestry Minister Todd McClay and Climate Change Minister Simon Watts restated the Government’s commitment to climate action and recognised that a strong and stable ETS is our most effective tool for achieving our climate targets.

“It is widely recognised that the market is currently significantly undervalued. Consistent policy settings and a long-term commitment to stability – like that signalled by the Government – are needed to bring back confidence in the sector and certainty in the market.

“A strong and rising market price will enable the local investments in reductions and removals that are essential to meeting New Zealand’s climate targets.”

Mr Cushen says despite the Government’s signals, it could reinforce those assurances by clearing up some areas that have created confusion in the market.

“The suggestion of a lowering price floor contained in the latest Ministry for the Environment consultation, which was presented without any obvious rationale, was not at all helpful for the market and the broader sector.

“To really draw a line under this period of market uncertainty, the Government should announce that this suggestion will be dropped, with no further work done on its development.

“Ultimately, the efficient and stable functioning of the ETS will support the climate action we need to meet our international targets, and ensure Kiwi taxpayers are not left footing the bill for expensive offshore mitigations.”