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Cap-and-ban could kill carbon market, warns broker

Cap-and-ban could kill carbon market, warns broker

An artificial cap on carbon prices and a ban on international sales of New Zealand credits will effectively kill the development of the carbon market, says trader Nigel Brunel.

Speculation is building that the Government intends taking these actions – and possibly offering government assigned amount units (AAU emission credits) for sale at the capped price - as a way of limiting the financial impact of the emissions trading scheme on heavy emitters, the country’s specialist carbon markets news service, Carbon News (www.carbonnews.co.nz) reports this morning.

New Zealand forestry credits are currently trading at around 80 per cent of the price of CERs (international credits), but Brunel says that a price cap and the banning of sales offshore would push prices down.

Any move to offer government AAUs for sale – even for immediate surrender – would severely restrict demand for private credits, Brunel told Carbon News.

The forestry industry, the major source of New Zealand credits, is up in arms over the issue and has launched a major lobbying campaign.

On Monday, the Government said that forestry would play a major part in meeting its 2020 emissions reduction target of 10 to 20 per cent below 1990 emissions levels.

Yesterday, the Kyoto Forest Owners' Association said that the target is achievable with significant new investment in forest planting, but warned that investors want assurance that the government won’t interfere in forest policy.

“In particular, forest investors will need to know there will be no artificial price caps placed on the price of the credits they sell and that the credits they earn can be internationally tradable,” said chief executive Roger Dickie.

Climate Change Issues Minister Nick Smith said he could not comment on questions from Carbon News on whether the government would impose a carbon price cap or ban international forestry sales.

However, Carbon News reports Smith as telling it the Senate defeat of the Australian Carbon Pollution Reduction Scheme yesterday won’t stop New Zealand pressing ahead with an ETS. Smith says he wants a bill amending the ETS law through by December. Carbon news reports that talks between National and Labour are understood to be bogged down by what deal should be for agriculture.


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