Forestry and the Emissions Trading Scheme - February

The 2014 emissions year has concluded and emitters are completing emissions returns for the year. Most emitters are expected to surrender ERUs rather than the more expensive NZUs. The last chance for surrender of ERUs is the 31st May 2015. From this point onwards we enter a domestic only ETS, with NZUs and New Zealand AAUs the only valid units for surrender.

Price Update

NZU prices increased over December and January, with price spikes as high as $6.15 per NZU, albeit on small volumes. NZUs are currently trading at around $5.80- $5.95 per NZU, dependent on parcel size. ERUs are currently trading at around $0.10 per ERU. The only forestry related activities ERUs can now be used for is for surrender liability that is associated with deforestation that was notified prior to the 31st December 2014. Emissions returns for these deforestations are due by the 31st March 2015.

The figure below shows the recent carbon credit prices, for both NZUs and ERUs.

CO2 price trend

Figure 1: Recent Carbon Prices - NZ$/t CO2e – Real (CPI adjusted) 

Voluntary Emissions Returns- Post 1989 Participants

For post-1989 forestry ETS participants, the only compulsory requirement under the Climate Change Response Act (2002) is to submit a Mandatory Emissions Return (MER) at the end of each 5 year commitment period. If you are a post-1989 ETS participant, then you have an option to complete a voluntary emissions returns (VER) annually by the 30thJune. If you elect to submit a VER, then you will receive the New Zealand Units (NZUs) you are entitled to for the carbon stock changes for both 2013 and 2014, or 2014 only if you submitted a voluntary return last year. If a VER is not submitted, then all units you are entitled to will be received either following the next completed VER or after the next MER which is due in 2018.

If you are a Field Measurement Approach (FMA) participant, your participant-specific look up table will be used for all emission returns. For those who are not FMA participants the default look up tables will be used.

The advantage of submitting a VER is that you will receive the NZUs for the preceding year earlier than if you wait for the allocation after submitting the MER in 2018. This early allocation of units may be of value to you if you want the option to sell these units.