Susan Kilsby: ANZ agricultural economist on the latest carbon auction failing

The second carbon auction of the year failed with no bids made.

4,075,700 New Zealand Units were on offer at the June auction - prompting zero interest from potential buyers.

ANZ agricultural economist Susan Kilsby explains why the market didn't feel the need to turn up for this.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Whatever Duzl get another carbon auction has failed. There are
serious questions now over whether our carbon market is actually
working or not. Just over four million units were available
to buy today at sixty four dollars each, but they're
costing just forty nine bucks on the secondary market, so
no surprise, none was sold at the auction. Susan Kilsby
is an agricultural economist today and zen and with us now. Hey, Susan, Hello,

(00:22):
is this a case of just pricing them too high?
Or is it a case of people now being quite
nervous about the direction of the climate policy.

Speaker 2 (00:29):
Well, it really comes down to the fact that there's
a lot of units in circulation at the moment, so
more than the market really needs. So people don't need
to go to these government auctions to buy their units
at sixty four dollars when they can buy them elsewhere
at forty nine dollars. So essentially it's just the market
working as it should when there's an oversupply situation where

(00:51):
it's actually reducing the supply by these units not entering
the market.

Speaker 1 (00:56):
Is it not the case, also, Susan, that the ones
that were unsold in this auction tryper over to the
next auction.

Speaker 2 (01:02):
Yeah, that's that's correct. So anything's unsold during the calendar
year gets transferred through to through to the end of
the year. As we saw what happened last year, which
we had a lot of options that didn't sell.

Speaker 1 (01:12):
The same thing is going to happen next time around it, Well,
the chances are now increased that the same thing happens
next time.

Speaker 2 (01:18):
Well, they've changed the rules a little bit so there
can be a partial clearance so long as they meet
those minimum prices, which wasn't the case last year, so
it did get harder and harder to clear the clear
the market last year. Now there can be a partial clearance,
so as long as there's buyers for some of those units,
they will sell. But you know, there is a huge
amount of units in circulation at the moment, and these

(01:40):
really come into the market through through alternative ways. So
anything that is any forestry plantings that are registered in
the unit into the ets basically create units. So we've
got this extra supply coming in from forestry, so these
the supply from the government auctions isn't really needed to
stuff so great degree.

Speaker 1 (02:00):
Is that the problem with why we've got so many
It's that we just have too many coming in from forestry,
not that we're not using enough, we have too many
coming on.

Speaker 2 (02:08):
Yeah, Well, most ETS is around the world, there's a
lot operating in a lot for different countries. Most have
a cap supplies. There's a limited amount of supply of
units that can come in. But the way we've set
it up with allowing forestry to be used as offsets
as well, there's real uncertainty around that supply that will
come from forestry. No one really knows who's going to
plant to how many you know, the number of trees

(02:30):
and how many will be registered into the scheme. So
it creates this huge degree of uncertainty. So it can't
really be used as a cap and trade scheme like
it's been used elsewhere by sort of pushing the price
up to encourage the reduction and emissions as the supply
keeps growing.

Speaker 1 (02:45):
Now that agriculture has been officially exempt again from the ETS,
are there other sectors who are also hoping for the
same treatment.

Speaker 2 (02:54):
I'm really not sure. I think most of the other
sectors there's you know, there's been our ETS and means
and does cover a pretty broad range of sectors, particularly
compared with other athists around the world. I don't think
we'll see a lot of changes in that, I mean
excluding excluding agriculture really came down to the fact that
most of the agricultural emissions are may say not CO two,

(03:15):
so a different guest. They're really just treating it differently.

Speaker 1 (03:18):
Susan, good to talk to you. Thank you so much.
Susan killsby Agricultural Economists. For more from Hither Duplessy Alan Drive,
listen live to news talks it'd be from four pm weekdays,
or follow the podcast on iHeartRadio.