What’s Going On with Carbon Prices? [April 2025]

This blog is based on information from our March 2025 CarbonCurious webinar.

For the first two months of the year, carbon prices looked steady. But that changed in March. Following another failed auction, NZU prices dropped into the low $50s. For landholders, forest owners, and sustainability managers, this shift is creating uncertainty and raising some important questions:

• Why are prices falling when emitters still need to buy NZUs?

• Aren’t auctions supposed to set the market price?

• What should you do if you’re holding credits or planning to register?

In this blog, we unpack the current market dynamics - recent price movements, the influence of the NZU stockpile, and the evolving pressures on supply and demand.

Disclaimer: This blog is for general information only. It is not advice, a forecast, or a prediction. While we aim to provide accurate insights, there may be errors in fact or analysis - so treat this as a prompt to look closer, do your own research, and consult official sources wherever possible. Carbon markets are complex, and future prices or policy changes are inherently uncertain. You should always seek independent advice before making any trading or investment decisions.

1. The Auction

The March ETS auction didn’t clear, meaning no units were sold. It’s not the first time it’s happened, and given market prices were already well below the $68 reserve price, it wasn’t unexpected. But it does underline a deeper market reality: even when prices fall, buyers aren’t necessarily rushing in.

2. Supply vs Demand 

Forecasts for 2025 show demand for NZUs (driven by emissions obligations) sitting at 42 million tonnes. Expected supply? Just 28 million tonnes.

You’d expect prices to rise - after all, when demand outstrips supply, that’s what usually happens. But carbon prices are falling. Why?

Because that gap doesn’t tell the whole story. The ETS doesn’t work like a typical supply chain. There’s a cushion softening the blow: a stockpile of NZUs built up from previous years. This buffer means buyers aren’t scrambling for units, even in a year with a supply deficit. The urgency to buy simply isn’t there, and without urgency, prices stay low.

3. The Stockpile: 157 Million NZUs

One of the most important (and often misunderstood) features of the carbon market is the NZU stockpile. But what is it exactly? The stockpile refers to carbon credits (NZUs) that have been issued in the past but haven’t yet been used. They’re sitting in private accounts - held by forest owners, emitters, and other ETS participants.

These units may have been earned through forest growth, allocated to emitters, or purchased in earlier auctions. But the key point is: they haven’t been surrendered yet, so they’re still technically available to the market.

As of now, this pool is estimated at around 157 million NZUs - which is more than three times the total expected demand for 2025.

The stockpile didn’t appear overnight. It’s the result of years of surplus supply and cautious demand. In previous years, many government auctions cleared at relatively low prices, adding more units to the system. Some emitters bought more than they needed at the time, hedging against future price rises. Forest removals continued to add units even when auction sales slowed or failed entirely. And many unit holders chose to hold onto their credits rather than sell, especially when prices were rising.

The size of the stockpile acts like a pressure valve for the market. If new supply drops or demand rises, prices should go up. But with such a large buffer available, buyers aren’t under pressure to pay more - they can simply dip into the pool of existing credits. That reduces urgency and flattens price movements. It explains why carbon prices aren’t rising, even when emissions obligations still exist and auctions fail to sell.

4. But Not All Units Are For Sale

Just because these NZUs exist doesn’t mean they’re actually for sale. Many are effectively “spoken for”:

• Post-1989 (P89) forestry units are often held to cover future harvest liabilities.

• Pre-1990 (P90) forestry units may be untouched - some landowners don’t even realise they have them.

• Emitters may be holding units to hedge against future obligations.

According to government-commissioned analysis, only around 52 million tonnes of the 157 million are considered “surplus” and likely to be available for trade. That makes a big difference when thinking about how much supply is truly active in the market.

5. Seasonal Selling Adds Pressure

From January through June, landowners receive their NZUs for the prior year’s forest growth. For many, this income is a key part of managing farm or business finances.

Naturally, that leads to selling.

But buyers aren’t always active in the same window. They often buy based on longer-term forecasts, not short-term pricing. That seasonal mismatch can lead to short-term oversupply, which further pulls prices down.

6. Are People Selling “Unsafe” Carbon?

This is one of the trickiest parts of today’s market.

"Unsafe" carbon refers to units that may be needed later to meet ETS obligations - particularly for post-1989 forests that are planned to be harvested.

With the market soft and cashflow tight for some landowners, there’s concern that these unsafe credits are being sold now. That behaviour adds more supply into the market, increasing downward pressure on price - but it also creates future risks for those sellers. For landholders, it’s a tough call - selling may solve short-term needs but leave you exposed down the track.

We’ll unpack safe vs. unsafe carbon fully in our next blog post.

7. So Why Is the Price Dropping?

There’s no single cause. Instead, we’re seeing a combination of:

• Market uncertainty following failed auctions

• Seasonal selling from foresters and farmers

• A stockpile large enough to ease short-term supply concerns

• Some holders offloading units to meet cash needs

• Low clarity around future policy settings

The market is thin - meaning not many active traders - and small shifts in behaviour can lead to big swings in price.

8. What It Means for Landholders

Right now, it’s a buyer’s market. That doesn’t automatically mean you shouldn’t sell, but it does mean your timing and strategy matter.

The best approach?

• Know your forest’s carbon potential

• Understand which units are safe to sell

• Factor in your long-term forest plans

• Align your actions with your financial needs and risk tolerance

And most importantly - stay informed. The ETS isn’t static, and your best decision today depends on what’s happening in the wider market. If you’re unsure where your forest stands, the best first step is getting clarity on your carbon position.