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Forestry and the Emissions Trading Scheme - October

International

As reported in recent issues of Wood Matters, the United Nations Framework Convention on Climate Change (UNFCCC) international climate conference (COP21) will be held in Paris this year, commencing on the 30 November.

Over 150 countries covering around 90% of global emissions have now submitted their Intended Nationally Determined Contributions (INDC).

A draft agreement released at the start of October outlines elements of the new climate change agreement that will be discussed in Paris, covering issues such as climate change mitigation, adaption, technology transfer and finance. The draft agreement has few provisions to support the use of market mechanisms such as international trading. 

The major emitters (China, EU and the United States) have all ruled out using foreign offsets to help meet their targets. The nations that intend to buy offsets are relatively small emitters with limited demand, such as Canada, Japan, New Zealand and Switzerland. The nations that wish to sell emission reductions are largely developing nations, such as Ethiopia, Haiti and Cambodia. 

The outcome of discussions on the use of market mechanisms is pertinent to New Zealand as to date we have been reliant on the imports of emission reduction units from offshore to meet reduction targets. New Zealand is likely to require imports of emission units to meet its INDC when the forests that were planted in the 1990’s are being harvested.

Domestic

The first round of the Afforestation Grant Scheme applications has been completed, with the Ministry for Primary Industries confirming acceptance of 5,819 hectares to be planted in winter 2016. The objectives of the AGS are to improve land-use productivity, enhance regional economic development and achieve environmental benefits.

The next round of applications for the AGS will open in April 2016 for planting in winter 2017. For more information of the AGS please see (June 2015 Wood Matters) or contact your local PF Olsen forest manager. 

Price Update 

The NZU market weakened to around $6.45-6.50 over the last month, recovering to currently trade at around $6.75-6.80 per NZU. 

The figure below shows the recent carbon credit prices for EUAs, CERs, NZUs and ERUs. Note that from 1st June 2015 only NZUs or New Zealand AAUs are valid units in the NZ ETS. EUAs are valid units for trading within the European Union.

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

Recent Carbon prices