Forestry and the Emissions Trading Scheme

Domestic News

Briefings have been provided to the incoming Minister for Climate Change from both the Ministry for the Environment (domestic) and Ministry of Foreign Affairs and Trade (international). These papers outline the status of current work, as well as priorities and challenges ahead, particularly in meeting our Paris Accord commitments. The briefings can be found here.

In a recent carbon markets report, OMF’s Nigel Brunel laments the government’s lack of engagement with the market, pointing to comments in one of the briefing papers:

“We saw the most preposterous ignorant comment from officials this week who said “External communication about any aspect of New Zealand’s activities in the area of international carbon markets needs to be handled carefully,” the MFAT Briefing to the Incoming Minister says. “Public discussion could give rise to speculation and price volatility within the New Zealand Emissions Trading Scheme.” In reality - the lack of public discussion, interaction and dialogue with the market actually fuels speculation and volatility. It's bewildering and very concerning given the financial risk New Zealand faces in meeting its Paris target.”

We hope that 2018 will bring more certainty as to the details and timeframes for proposed changes (particularly around forestry accounting rules), and what impact changes may have on carbon revenue potential.

Price Update

Market commentators got it right when they predicted that $20.00 would be reached prior to Christmas. NZU prices rose through this mark earlier in December, and have continued upwards towards $21.00 Current pricing (as at 18th December) is $20.95.

Given these near-record high prices, it is somewhat surprising that interest to sell is light. It seems that many forest-owning sellers are prepared to ride this out a little, and see just how far this run will go.

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