Emissions Trading Scheme - September 2012

NZUs continue their downward trend trading in the $4.20 to $5.00 range, currently at around $4.20. The much talked about temporary set-aside of carbon to curb oversupply in Europe appears to be on the go-slow with opposition from Poland and now the Netherlands. There are also significant volumes of CERs coming onto the market in Europe and it appears the volumes of ERUs is set to increase particularly from Russia, all of which is driving UN offset prices lower. So there appears little upside for the struggling NZU price in the short-term.

PF Olsen has recently purchased small quantities of ERUs on behalf of clients and they have come from the following types of projects:

  1. A nitrous oxide abatement project in Romania sponsored by Netherlands
  2. Reduction of process losses in power lines in Ukraine sponsored by Poland
  3. Dismantling of coal waste heaps in Ukraine sponsored by Latvia

ERUs are currently legal tender in the NZ ETS and these projects are an example of where ERUs are being sourced, in relatively large quantities, by NZ emitters. It is a shame that New Zealand's efforts to reduce green house gas emissions are benefiting Eastern Europe more so than changing behaviours in our own country.

Colin Hercus, Forestry Consultant from PF Olsen, recently attended the Carbon Forestry 2012 conference in Auckland. Colin presented on how the ETS could work for owners of small forests with a focus on "safe carbon". Understandably, a lot of attention during the conference was on the state of the NZ ETS and the lack of intervention by the government to restrict the importation of cheap overseas units such as ERUs. The discussions included the proposed changes to the NZ ETS in the form of an amendment Bill that is now currently before a select committee. This Bill doesn't propose to directly restrict the importation of cheap overseas units. The Select Committee has an opportunity to review this and it has been the subject of many submissions including the one submitted by PF Olsen and many other organisations and associations involved in forestry. The outcome of the Select Committee process should be known soon as the government wants to pass this Bill into legislation before the end of the year.