You might think that this was a good problem to have: long-term there's effectively a finite pool of government credits in the ETS, effectively representing a long-term emissions budget, with anything extra having to come from trees. Cancelling some of this pool rather than using it - which is what the auction failures did - reduces total long-term emissions, or at least requires them to be compensated (for what that's worth). And anything which reduces the supply of units increases the price, and hence the economy-wide incentive for emissions reduction. But He Pou a Rangi was weirdly fixated on the idea of reducing the surplus over the period to 2030, and not before. Doing it too early - in 2029, say - was Bad. So it had to increase auction allocations to stop that from happening.
The good news is that they don't get the final say. There's another round of consultation before a Ministerial decision, and the Ministry for the Environment has included an option of maintaining the lower status quo allocations, with a proportionate allocation for 2030. Which would mean auctioning 13.6 million tons less than He Pou a Rangi's recommendation:
...which seems like a good idea. Partly because surplus estimates seem to be very uncertain and move around a lot, so its avoiding having to reverse things in a hurry, and partly because insofar it increases the chances of us actually meeting the second emissions budget (something which is now looking in doubt thanks to National's stupidity) - not to mention reduces our Paris liability. But mostly because we should be using every excuse we possibly can to grind down emissions budgets so as to reduce emissions.
The consultation is open until 29 June. I urge people to read the consultation documents and submit on it.