Price of releasing carbon emissions drops 10% after Government amends climate policies

Wednesday, 5 November 2025

Climate Change Minister Simon Watts appeared to suggest “demand and supply” rather than government policy changes were behind a sudden drop in the price of carbon credits.

The price of carbon credits has dropped by about 10% after the Government horrified environmental campaigners Tuesday evening by announcing a huge shift in climate policy.

Carbon credits — which each entitle owners to release a tonne of carbon dioxide into the atmosphere — closed at $51.70 Tuesday, prior to the policy announcement, and dropped as low as $41.50 today, before recovering somewhat to $47, ANZ economist Matt Dilly said.

For much of the previous two weeks they had been trading in a relatively tight band around $55 according to Transpower-owned EMSTradepoint.

The price drop makes it cheaper for businesses such as fossil-fuelled electricity generators and large manufacturers to release carbon dioxide into the atmosphere and therefore has the effect of reducing the incentive for them to invest in carbon-abating technologies.

Dilly said the market for carbon credits was reasonably liquid and it tended to react rationally to market developments.

The changes announced by the Government mean the policies underpinning the Emissions Trading Scheme, such as the number of new carbon credits the Environment Ministry puts up for sale in quarterly auctions, will no longer need to be set with the goal of ensuring that the ETS alone achieves the commitments the Government has made under the Paris agreement to reduce emissions.

The Government is also planning to cut back the advice the Climate Change Commission needs to provide to the Government and push back by 25 years the date by which the public sector itself needs to become “carbon neutral”, to 2050.

Climate Change Minister Simon Watts declined to accept the drop in the carbon price was caused by the changes in government policy he had announced, when repeatedly pressed on that on Wednesday.

During his address to the UN General Assembly, Trump scoffed at climate change predictions, warned Europe that immigration is ‘destroying your heritage’.

“It's a market, and the reality is the market is dealing with demand and supply considerations,” he said.

James Renwick, a geography professor at Victoria University, described the Government’s announcements as worrying and consistent with the lowering of targets for the reduction of methane emissions. They sent a clear signal that the Government was not serious about domestic emissions reductions, he said.

The most significant change was the Climate Change Commission would no longer be required to provide advice to the Government on emissions reduction plans, he said, arguing that “did away with one of the fundamental reasons for having the commission in the first place”.

That, combined with the decoupling of ETS settings from the Nationally Determined Contributions the Government agreed to make under the Paris agreement suggested it was making it easier to weaken domestic action, perhaps implying increased reliance on purchasing offsets overseas, Renwick said.

Nathan Cooper, associate professor of law at the University of Waikato, said questions were being asked about “how serious the coalition government is on climate change” ahead of the “COP30” UN climate change conference in Brazil next week.

Watts said the new policies did not “lower our ambition” on climate change.

Instead the policies would “reduce costs to government and business and provide greater certainty, enabling us to make meaningful reductions more efficiently”, he said.

New Zealand was playing its part promoting an international consensus on climate change and focusing on what it could do to reduce emissions, Watts said.

“I think that all signals that we are taking action.”