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New Zealand’s Carbon Market Has Almost Collapsed

Media release
Carbon News

15 February 2013

New Zealand’s Carbon Market Has Almost Collapsed

Prices for spot NZUs (NZ emission units) set a new low this week, breaking the $2 floor for the first time, the country's specialist emissions market intelligence service, Carbon News, reports today..
Some international units are trading as low as 15 cents.

Sentiments expressed by Carbon Match founder Lizzie Chambers in a column for Carbon News this week – in which she describes the New Zealand Emissions Trading Scheme as “suffering a lack of credibility in the eyes of landowners” and predicts a price race to the bottom – are echoed privately by others in the market.

The planting of forest is a critical part of the Government’s plan to reduce New Zealand’s overall greenhouse gas emissions. The ETS is supposed to encourage this, by providing foresters with an extra income stream.
But rock-bottom prices (from more than $20 for a spot NZU in early 2011) has seen major forest owners, such as Ernslaw One’s Thomas Song, who made millions for his company in the first years of the scheme, have backed away from it.
Others have implored Prime Minister John Key to intervene to stop the flow of cheap carbon into the country.

Last month, Carbon News reported that foresters are now leaving the scheme. The Government has instructed officials to find other ways of encouraging afforestation, such as a return to the Afforestation Grants Scheme.

New Zealand’s decision not to sign up to the second commitment period of the Kyoto Protocol has caused further market uncertainty.

Climate Change Minister Tim Groser has been quite clear that New Zealand will continue to have a price on carbon outside the Kyoto Agreement, but the COP 18 meeting in Doha voted to exclude this country (along with Japan and Canada) from international credits generated under the second commitment period.

While officials are still calculating the ramifications of New Zealand’s withdrawal from the agreement, one effect is likely to be the disappearance of a formerly lucrative market for NZUs (converted to AAUs) – sale to European governments.


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