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Forestry and the Emissions Trading Scheme

Domestic News

Minister for Climate Change Issues Paula Bennett has announced details of a climate change action plan to be put in place with China. The action plan is included in a package of bilateral initiatives announced today by the Prime Minister and visiting Chinese Premier Li Keqiang. It gives practical effect to the broad approach set out in the New Zealand-China Climate Change Cooperation Arrangement signed by the two countries’ leaders in 2014.

“Both our countries are serious about responding to climate change and this arrangement will assist both of us in delivering on our long-term commitments under the Paris Agreement,” Mrs Bennett said.

“New Zealand has ambitious climate change targets backed by an emissions trading scheme that we are currently reviewing. China is rolling out its own emissions trading scheme, by far the largest ETS in the world, and is potentially an important future carbon markets partner.”

The action plan is a first step towards greater cooperation between Chinese and New Zealand carbon markets experts to share technical information and expertise on carbon markets and emission trading schemes, as well as agricultural greenhouse gas mitigation. More information can be found here.

Source: NZ Government press release 27 March 2017

International News

Last month, US President Donald Trump signed a new executive order which aims to reduce enforcement of climate change regulations in order to stimulate job creation. The order initiates a review of the Clean Power Plan, rescinds the moratorium on coal mining on US federal lands and urges federal agencies to "identify all regulations, all rules, all policies ... that serve as obstacles and impediments to American energy independence”, a White House official says.

Specifically, the order rescinds at least six Obama-era executive orders aimed at curbing climate change and regulating carbon emissions, including Obama's November 2013 executive order instructing the federal government to prepare for the impact of climate change and the September 2016 presidential memorandum that outlined the "growing threat to national security" that climate change poses.

It remains to be seen whether Trump’s climate stance extends to any change to US participation in the Paris Agreement, but one New Zealand climate researcher believes the latest policy roll-back shouldn’t derail progress. Victoria University researcher Dave Frame believes that the Paris Agreement is “much less vulnerable to the defection of a single actor than the previous version [the Kyoto Protocol]”. Frame also believes that other nations will fill any gap left if the US exits.

"If the technology leader refuses to lead, that lets other people step into their shoes and it's an opportunity for China to show global leadership, and it's an opportunity for European manufacturers and low-carbon innovators elsewhere."

Sources: CNN, New Zealand Herald.

Price Update

After a relatively smooth start to March, NZU prices dropped relatively sharply mid-month, losing approximately $0.50 in the space of a week to bottom at $17.00. Price recovered somewhat to end March at $17.15, and have continued to rally through the start of April, with prices shown at around $17.60 as at 7th April.

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)