Carbon market dead after emissions deal
18 November 2008
Mega investments cancelled, carbon market dead after political deal to suspend emissions trading
New Zealand has immediately lost a $125 million forestry investment, a major international carbon market players has postponed plans to invest here and the entire emissions trading market has come to a halt.
This follows the announcement of the National-Act policy agreement to amend law to suspend the emissions trading scheme while it is reviewed by a select committee and potentially scrapped in favour of a carbon tax, depending on the committee's findings.
The country's specialist carbon market news service, Carbon News, ww.carbonnews.co.nz, this morning reports a $125 million forestry project has been scrapped and scores of forestry jobs lost as a result of a deal between the Act and the new National government.
Kyoto Forestry Association spokesman Roger Dickie yesterday told Carbon News that the political deal has scuppered a forestry investment worth $125m, and that the association has had buying orders for land cancelled.
Dickie says that a major Asian company was intending to plant 25,000ha of forest in New Zealand – a planting regime that would have resulted in scores of provincial silviculture jobs.
"The jobs that would come from this investment in provincial New Zealand would have been very significant," he said.
The company was looking to invest in planting trees for the combined purpose of carbon sequestration and harvesting, Dickie said. Recent average prices have shown that this combination has been providing a much better internal rate of return (IRR) than trees planted for wood alone.
"Based on recent average prices, a forestry investment for wood alone forecasts an IRR of around four per cent," he said. "A forestry investment based on a combination of carbon sequestration and harvesting shows an IRR of nine per cent or better."
The company, which Dickie would not name, has already spent tens of thousands of dollars on feasibility studies in New Zealand.
Carbon news also reported one of the biggest players in the world carbon market yesterday put plans to set up in New Zealand on hold in the wake of the new government's decision to review the emissions trading scheme.
The move compounds what TZ1 boss Mark Franklin says was a battering of New Zealand's international reputation in the carbon markets yesterday.
EcoSecurities was due to announce its arrival in New Zealand today. Instead, it has cancelled plans for a launch party this evening and is spending the day trying to find out what is going on.
Chief operating officer Adrian Fernando told Carbon News from London that the company – which has an 11-year history in carbon markets and offices in 20 countries – had intended to set up shop here: "The recent announcement to delay implementation of the ETS comes as a surprise and has prompted us to review our plans."
Carbon news report that sales of NZUs are effectively dead as carbon markets struggle to understand the implications of the new government's moves on the ETS.
OMFinancial trader Nigel Brunel, who has been negotiating sales of NZUs from forests, told Carbon News the announcement has killed trade.
"If the National Government had said it was just going to review the ETS, then there would still be deals on the table to do," he told Carbon News.
"But the government saying that the ETS is on hold, subject to full review by select committee and that they will relook at a carbon tax, basically kills the ETS for the foreseeable future. The NZU deals that we were very very close to doing are looking dead at this point."
TZ1 boss Mark Franklin told Carbon News that no-one seems to know what is happening. When asked about the status of NZUs, he said:
"I have no idea if they have any status. We deal with everybody, and nobody knows what's happening. There are many, many companies in this country who are setting up their carbon systems. Now they don't know what to do."
The Ministry for the Environment was yesterday referring questions to the Government.