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Forestry and the Emissions Trading Scheme - June 2013

Prices for NZUs have fluctuated between the $1.65 and $2.00 mark in May/ early June and are currently trading at around $1.80 per NZU. The cheaper imported ERUs, which can be used for surrender purposes until 2015, have ascended sharply from a low of $0.13 in May to $0.25 per ERU this week. This rise in ERU price is due to the balance of supply and demand. Recent supply of ERUs has decreased with one major supplying country, the Ukraine, no longer issuing ERUs, whilst there is still plenty of demand for ERUs from both emitters and forestry owners exiting the ETS.

Given the difference in the prices between NZUs and ERUs many post-1989 forest land owners have elected to exit the ETS, surrender ERUs and sell their NZUs. This has allowed post-1989 forest land ETS participants who had not sold any NZUs to trade and profit from the ETS and allowed those who had sold some or all of their NZUs to settle their future harvest liability now at a relatively low cost. Following their exit from the ETS some of these ETS participants have elected to re-register, which allows them to claim carbon credits from January 2013 onwards.

Many post-1989 forest land owners will have recently received their latest entitlement of NZUs as a result of the mandatory emissions return (MER) for the first commitment period 2008-2012. For participants with less than 100 hectares this was based on the default look up tables. For Field Measurement Approach (FMA) participants with more than 100 hectares this mandatory emissions return was based on the specific look up tables. Any over or under claim that occurred in previous voluntary emissions returns (VER) that were based on the default look up tables is rectified with the NZU entitlement based on the FMA participant specific look up tables.

If you are a PF Olsen client and you require any advice relating to the status of your forest in relation to the ETS, then please contact erin.leahy@pfolsen.com.