NZU should be issued during the year to Forest Owners rather than all at once on the same date – NZETS review
Environmental Intermediaries & Trading Group Limited wrote to Dr Nick Smith and Jeannette Fitzsimons asking them to consider instructing MAF to issue NZU units on emissions returns staggered throughout the year to give the same effect as GST returns and provisional tax payments do for the Governments cashflow in terms of issuing credits rather than the current once a year for everyone for the previous year.
EITG Director Richard Hayes says ‘in our submissions on the review of the New Zealand Emissions trading system we again emphasised the importance of the design of the system to allow liquidity and permit price discovery’. ‘Price discovery’ he went on to say ‘is essential to allow emitters to structure their responses to Global Warming and justify long term investments.’ ‘With no price or highly volatile pricing the ETS is unlikely to function as intended’ he added.
At present MAF processes emissions returns for all foresters at the same time once a year and issues the requisite NZU units to all registered forest owners by the 31st March the previous year. Forest owners entering the system on the 1st of April can wait a year to receive credits. Whilst they still receive credits from 1st January 2008 the structure of the MAF system means there is a large amount of work in a short period and then a huge supply of NZU units, then no more will be issued until the following year. Some carbon traders have suggested ‘selling forward’ - this process simply won’t work if there are delays in processing returns and issuing NZU in the future. Moreover there will not be a reliable flow of units into the market during the rest of the year, and a secondary market if any, may be highly volatile.
Emissions returns and issuing of NZU units for the preceding 12 month period should be at least on the anniversary of the forest owner joining the ETS or a date elected by the forester. The first return will yield the credits from 2008 plus some part of the year in which the forest owner registers under the ETS, then each anniversary after that they will be issued a years credits for the previous year.
Further information on Carbon Trading the NZETS and Kyoto can be found at www.eitg.co.nz