ETS decisions to stunt NZ carbon market
Tue, 03 Jul 2012 4:48p.m.
Government decisions to leave the emissions trading scheme at current settings indefinitely means the New Zealand carbon market has been "buried in a six-foot hole," says Nigel Brunel, head of carbon and energy trading at OM Financial.
While Carbon Match principal Lizzie Chambers says "suspended animation" is more accurate, the impact of the Government's ETS reform decisions, announced yesterday, will likely keep international carbon emissions reduction units (CERs) cheaper than New Zealand-produced Units (NZUs) for the foreseeable future.
Even with a likely drop in the price of NZUs, which are trading between $6.85 and $7.05 per tonne of emitted carbon, offsetting carbon emissions by buying offshore credits will make more sense for a major emitter than investing in NZUs.
A price drop is expected because yesterday's announcements left some major emitters in the electricity, heavy industrial and transport sectors holding more NZUs than they need because their ETS will be unchanged, instead of rising as expected.
Mr Brunel said "the premium of NZUs over European carbon has been a bit fake because there's no supply of NZU's to push it to a discount" and major emitters were now sellers.
"The carbon market is now in the lap of Europe and the control of the banks," as the latest changes would discourage active involvement in the New Zealand carbon market by carbon-intensive industrial players and plantation foresters, at least until depressed global prices revived," Mr Brunel said.
Under the ETS as originally announced, major emitters would have faced the full $25-per-tonne maximum price of carbon for every tonne of emissions, instead of the $12.50 a tonne they have faced since the scheme began in 2008.
Global CER prices have fallen below $6 a tonne since then, leading to the unexpected outcome of international units costing less than NZU's.
That will only be fixed when a glut created by distortions in the EU carbon market is removed under negotiations requiring unanimity among its 27 member states.
The prospect of such reform before 2016 was "very limited", meaning a four-year wait for New Zealand, which has the only functioning ETS outside Europe, Ms Chambers said.
"It seems that our Government is happy to let European policy-makers be our masters indefinitely."
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4/07/2012 8:07:50 a.m.
The worst carbon polluters in the world are the EU, so what is the EU doing over carbon emissions?Oh wait, they have a lower ETS rate, plus they dont charge ETS on biologicals.Take a air quality measure, eg tonnes of carbon per sq km and the EU is the worst in the world. Till the EU addresses ETS why should NZ be the only one in the world paying for the benefit of the EU? And how likely is the EU to change currently with so many of its members being in bailout status or close to needing bailout status?What would ETS for our dairy farmers mean? Well we are being told that it would be roughly $1.5 billion, and with 10,000 dairy farmers this would be a life tax on cows for breathing of roughly $150,000 per farmer. Take the same farmers income in 2009 where the average farmer paid around $1500 tax because they are so wealthy! This would be a tax on farmers who cant afford a tax. If we are going to tax farmers, we also need to tax beneficaries who in 2009 had much higher incomes than the average farmer! A typical beenficary househould should see over $2000 in tax with no increase in benefits to be fair! This being just the cost of carbon of a typical man/woman/child in NZ.The farmers dont have the income so who would be paying the ETS? Could farmers get more money from exports? Hardly, as they dont set the price internationally. This leaves collecting the $1.5 bil from NZ dairy sales, which currently is about $2 billion. This means an ETS life tax on cows for breathing would be a doubling of NZ prices to NZ'rs. When Labour/Greens says we need to tax cows for breathing they are really saying they want NZ'rs to pay double for dairy products. This when they complained about the cost of dairy just last year!
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