Trading NZUs: How the Market Works

Once you’ve earned NZUs, you have options. Hold them, sell them, or use them for offsetting. Understanding the market helps you make informed decisions.

Market Structure

Primary Market (Auctions)

The government sells NZUs through quarterly auctions. Key features:

If market prices are below the reserve price, auctions may not clear (no units sold). This has happened repeatedly in recent years.

Secondary Market

Most trading happens on the secondary market — direct transactions between buyers and sellers:

There’s no formal exchange. Prices are discovered through negotiation and reported by price-reporting agencies.

Price Discovery

NZU prices are set by supply and demand. Key reference prices:

Price reporting services (like CommTrade, Jarden) publish daily or weekly price assessments.

Selling Your NZUs

Selling Through Brokers

Most forest owners sell through carbon brokers who:

Typical broker arrangements:

Direct Sales

You can sell directly to:

This avoids broker costs but requires:

Transaction Process

  1. Agree terms with buyer (price, quantity, settlement)
  2. Initiate transfer through NZETR
  3. Buyer confirms the transfer
  4. Units move to buyer’s account
  5. Payment settled separately (bank transfer, etc.)

The NZETR handles unit transfer but not payment — that’s between buyer and seller.

Buying NZUs

Why Buy?

You might buy NZUs to:

Buying Options

Government auctions:

Secondary market:

Contracted purchases:

Market Dynamics

Supply Factors

What increases supply:

What decreases supply:

Demand Factors

What increases demand:

What decreases demand:

Price Signals

Key things that move prices:

Market Participants

Compliance Buyers

Large emitters who must surrender units:

They’re the ultimate demand source.

Forestry Sellers

Forest owners like you who earn units through sequestration.

Aggregators

Consolidate units from many small forests, sell in bulk to compliance buyers.

Traders and Speculators

Buy and sell to profit from price movements. Provide liquidity.

Brokers

Facilitate transactions between buyers and sellers. Earn commissions.

Timing Your Sales

Arguments for Selling Early

Arguments for Holding

Hybrid Approaches

Many owners:

There’s no perfect strategy — it depends on your circumstances and risk tolerance.

Market Risks

Price Volatility

NZU prices have ranged from under $2 to over $80 in the scheme’s history. Factors beyond your control can move prices significantly.

Liquidity Risk

In a small market, you may not always find buyers at your desired price. Large sales can move the market.

Policy Risk

Government decisions affect the market:

Policy changes can rapidly affect prices.

Counterparty Risk

In direct transactions, there’s risk the other party doesn’t perform. Use established brokers or escrow arrangements for large transactions.

Getting Started in the Market

Minimum Transactions

Brokers often have minimums:

Market Information

Stay informed through:

Building Relationships

Carbon trading involves relationships:

Key Takeaways

  1. Two markets — government auctions and secondary market
  2. Brokers dominate for small sellers
  3. Prices fluctuate — driven by policy, supply, demand
  4. No perfect timing — balance cash needs with price views
  5. Transaction mechanics — NZETR handles units, you handle payment
  6. Stay informed — market knowledge improves outcomes

Next Steps

← Back to Learn