Explanatory note
This note is not part of the regulations, but is intended to indicate their general effect.
These regulations, which come into force on 4 January 2021, provide for auctions to sell New Zealand units under the Climate Change Response Act 2002 (the Act), and also set limits and price controls for units.
When auctions are held
The Minister for Climate Change or their agent (the auction operator) will hold auctions on dates set by the chief executive of the Ministry for the Environment. The auction dates must be consistent with an indicative schedule and meet certain date requirements (regulations 7 and 8). The indicative schedule is for auctions to be planned to be held on the 4 auction dates that are set out in Schedule 2 and then 4 times a year at reasonably regular intervals (regulation 6). Auctions may be postponed in exceptional circumstances, or if the bidding window is disrupted by outages, but they cannot be cancelled (regulations 10 and 11).
Auction volumes
The New Zealand units that are available for auction in a calendar year, other than units from the reserve amount, are distributed across the auction dates set for that year (regulations 12 and 13). Units from the reserve amount are released for sale at an auction only when an interim clearing price exceeds the trigger price for the reserve amount (regulations 12, 13, and 30).
Limits and price control settings for units
Regulation 14 sets, for each of the 2021 to 2025 calendar years,—
an individual limit on the New Zealand units available by auction (column 2 of the limits table in Schedule 3 (the limits table)); and
an individual limit on the approved overseas units used (column 3 of the limits table); and
an overall limit on the sum of the New Zealand units available by auction, the approved overseas units used, and the New Zealand units available by other means (column 4 of the limits table).
There is no individual limit for the New Zealand units available by other means in a calendar year, and the number of those units may cause an overall limit to be exceeded (regulation 14(2)).
Regulation 15 sets, for each of the 2021 to 2025 calendar years,—
the minimum price at which units may be sold by auction (column 2 of the price settings table in Schedule 3 (the price control settings table)); and
the trigger price for the release for sale of the reserve amount of New Zealand units (column 3 of the price control settings table); and
the reserve amount of New Zealand units that will be released for sale at an auction if the trigger price is reached or exceeded (column 4 of the price control settings table).
Auction notices and information
Auction notices must be made publicly available at least 30 days before an auction. They must include details of when the auction will be held, the volumes of units available for auction, the prescribed minimum price for the auction, and who can participate in the auction (regulation 16). General information for potential bidders must also be made publicly available (regulation 17).
Registration of bidders
Only registered bidders can bid at an auction (regulation 18), and only those with a holding account can apply to be registered (regulation 19). However, the Crown, as defined in regulation 19(5), is not eligible to register or bid at an auction. The application process, including the information applicants must provide and how it is to be verified, is set out in regulations 20 and 21. The auction operator will keep a register of registered bidders (regulation 22), but this will not be publicly available.
How auctions are run
Bids may be made at an auction only between 9 am and 12 pm on the day of the auction (the bidding window: see regulation 23). The auction operator must accept each bid submitted during the bidding window (see regulation 27) unless—
the bid does not meet the bid volume and bid price requirements set out in regulation 24; or
the bidder has not provided collateral for the bid in advance, as required by regulation 25; or
the bidder has not agreed to any terms or conditions that the auction operator has set under regulation 26.
Bids may be amended or withdrawn during the bidding window (regulation 28), and the auction operator must keep bid details confidential (regulation 29).
How auction results are determined
The New Zealand units available for sale at an auction are allocated to bids in order of their bid price, starting with the bid or tied bids that have the highest bid price (regulation 30). If there are not enough units left to allocate a bid its full bid volume, the bid is allocated the remaining volume or, in the case of a tied bid, its proportional share of the remaining volume (regulation 31). Units are allocated in 100-unit lots.
The clearing price for an auction is the bid price of the lowest-ranked bid to be allocated units (regulation 32), and the auction operator must sell, at that clearing price, all the units allocated to bids (regulation 33).
Settlement of auction sales
Successful bidders must pay for their units in full within 4 working days after the auction date (regulation 34). If they fail to do so, their units are treated as unsold and the collateral that they provided for the bid, up to the amount that is 25% of the required payment, is forfeit to the Crown (regulation 35). Once payment is received, the units are transferred from the Crown holding account to the bidder’s holding account.
Publication of auction results
The auction operator must make detailed auction results publicly available as soon as is reasonably practicable after they have been determined, and on the same day as the auction (regulation 36).
Regulatory impact statement
The Ministry for the Environment produced a regulatory impact statement on 8 May 2020 to help inform the decisions taken by the Government relating to the contents of this instrument.
A copy of this regulatory impact statement can be found at—
Issued under the authority of the Legislation Act 2012.
Date of notification in Gazette: 24 September 2020.
These regulations are administered by the Ministry for the Environment.