Carbon Market/Carbon Forestry Update

March was an intriguing month on the carbon market with the NZU price showing increased volatility. Within a week the price increased to the late $20s on the back of the Japan earthquake and fears of what a world without nuclear power would look like in terms of increased greenhouse gas emissions. The price has now consolidated to low $20s. The explanation of how this happened shows how the international carbon market can influence what happens here in New Zealand. Germany announced they were not going to extend the life of their aging nuclear power generation plants on the back of the nuclear crisis in Japan. This would increase their reliance on fossil fuel electricity generation in the future and international carbon prices responded by rallying significantly. This included CERs which can be used for compliance by emitters in New Zealand. Domestic emitters who held CERs were presented with an arbitrage opportunity to sell their CERs for a profit and make up the shortfall with the cheaper NZUs. This resulted in increased demand for NZUs and an increase in price.

PF Olsen successfully transacted the sale of a large aggregation of NZUs directly to two large domestic emitters. The aggregation was made up from 25 different forest owners. PF Olsen intend running more aggregation sales throughout the year. If you would like to know more please contact Colin Hercus by emailing colin.hercus@pfolsen.com.