Hunter River Salinity Trading Scheme 2022 Credit Auction

The scheme uses an economic framework to protect and manage saline discharges into the Hunter River. Credit auctions are held every two years to ensure the value of the credits reflect current environmental and economic priorities.

What is the objective of the credit auction?

The credit auction:

• distributes credits to those who value them most
• provides equal access for all bidders, including new entrants to the scheme
• aims to sell all 200 credits.

Why are credit auctions held every two years?

Credits have a lifespan of 10 years. The credit auction held on 26 May 2022, auctioned 200 credits to replace those that that expired on 30 June 2022.

How are the credit auctions held and run?

The 2022 auction was run using a web-based auction program developed by the University of Melbourne Centre for Market Design. This program has been used since 2014.

The 2022 auction program was hosted by First Focus IT Pty Ltd and ran for nine hours from 9am until 6pm. Bids were lodged online. Only registered bidders had access to the auction using unique usernames and passwords.

The 2022 auction was conducted in accordance with the rules detailed in the Hunter River Salinity Trading Scheme Credit - Auction Information (PDF ). Each registered bidder is able to submit one ‘bid schedule’ which comprises a number of groups of credits with a specific bid price per credit.  For example, a bidder seeking 17 credits could submit a bid schedule consisting of 3 credits valued at $13,983 each, 7 credits valued at $13,523 each, 3 credits valued at $6,460 and 4 credits valued at $2,925. This indicates that the bidder was willing to pay $167,690 for 17 credits.

At the close of the auction, the auction program ranks each bid from the highest credit value to the lowest credit value. The auction program then determines the ‘highest losing bid’, which is the starting value actually paid by successful bidders. The value of the ‘highest losing bid’ can be less than the bid price submitted by the successful bidder. Each bidder is then allocated a proportion of the 200 credits, based on their bid schedule until all 200 credits are allocated.

The auction process:

• operates in a single-bid, web-based auction environment
• maintains bidder confidentiality
• safeguards against anti-competitive behaviour.

Who participated in the credit auction?

The credit auction was advertised in local newspapers and on the EPA’s website prior to the auction date. This allows any interested party to register, including any new entrants to the scheme. 

In 2022, representatives from 12 organisations from mining and power generation facilities registered for the credit auction. All bidders represent organisations currently registered in the scheme and operating in the Hunter Valley. There were no bidder registrations from new entrants or non-industry representatives.

Only 11 bidders participated on the day of the auction.

What was the result from the credit auction?

All 200 credits were allocated and distributed between eight companies. The credit allocations and cost to each bidder is shown in the table below.

The auction raised $2,343,984 (including GST) which is a 263% increase when compared with the money collected in the 2020 auction ($890,674).

The highest price paid for a credit was $13,000, the average was $11,720 and the lowest was $3,319. The highest losing bid was $13,000.

Bidders were willing to pay between $2,250 and $100,000 per credit. One registered bidder did not participate in the auction. Of the eleven that participated, three bidders were unsuccessful in obtaining any credits.

More than 482 credits were sought from both successful and unsuccessful bidders but only 200 credits were available.

Where does the credit auction money go?

Net revenue from the 2022 auction ($2,343,984 including GST) will be used to offset the costs of the scheme in the 2022/23 operating year. Any shortfalls in funding the operation of the scheme are raised by the EPA directly from invoicing HRSTS participants.