Carbon Forestry and the Emission's Trading Scheme - February 2012

Carbon Price

NZU prices continued to fall in late December and early January reaching an all time low of $6.40. They have since strengthened slightly and are currently trading around $8.

On December 22, the Government banned the use of industrial gas or `grey' CERs in the ETS, although emitters who have purchased these units prior to this date have until the end of 2013 to use them for compliance. This ban did nothing to stop the continued fall of NZU price as the market is already oversupplied. What are `grey CERs'? They are Certified Emissions Reductions units issued from projects to reduce the destructive HFC 23 or N2O gases which are of questionable origin due to the low cost at which they can be eliminated. `Green' or non industrial gas CERs are still valid in the ETS.

So what has bought about the slight lift in NZU price? We have heard that some emitters are showing renewed interest in NZUs rather than CERs as they are concerned over taking a long-term position on `green' CERs due to the potential for limitations to be placed on the use of `green' CERs in the ETS in line with the EU and Australian schemes. The unrestricted importation of `green' CERs is untenable in the long-term as the resulting low NZU price doesn't encourage the reduction of GHG emissions or the planting of new forest to offset emissions - which was the intention of the ETS. The Ministry of the Environment has recently released briefing papers outlining this concern and the need for a reduction in offshore purchasing of units in the short-term. This news will likely increase the trade in NZUs and put upwards pressure on NZU price.

Post-1989 ETS Registration Deadline

If you want to claim your post-1989 NZUs for 2008 to 2011 by 31 March 2012, you need to get your forest registered before then. This deadline is for a voluntary emissions return. The final opportunity to claim your NZUs for 2008 to 2012 will require registration by the 31 December 2012. Despite low NZU prices, we are still seeing continued interest in post-1989 forest owners wanting to register into the ETS and MAF is still receiving a steady stream of applications. Many are registering for option value (claiming the 2008 to 2012 NZUs before they expire) and will decide at a later date if they should sell NZUs. If you require assistance to register, colin.hercus@pfolsen.com.