Forestry and the Emissions Trading Scheme

Westpac NZ recently released a Climate Change Impact Report prepared by EY assessing the impacts of climate change on the New Zealand economy.  The report modelled two scenarios:  

  • A “central” scenario modelling early action, including phased introduction of agriculture into the ETS from 2020-2030, resulting in significant domestic effort to achieve zero emissions. 
  • A “shocked” scenario modelled delayed response until 2030 with same sector participation in the ETS as now (i.e. no agriculture), followed by a shock event requiring rapid action to meet climate change targets.  Agriculture is phased in over a short period of 2-5 years.

A key finding of the modelling is that NZ can transition to a net zero emissions economy under either scenario and continue economic growth.  The “central” scenario results in economic benefit of around $30 billion and a 32% lower carbon price than the “shocked” scenario by 2050.  The “shocked” scenario resulted in a slightly healthier economy in the short term but the gain is lost as the pressures of faster transition slow economic growth.  Economic growth is not projected to be even across all sectors of the economy.  The industries affected the most by climate change are agriculture, energy and transport.  The modelling indicates that early phased transition to a zero carbon economy will provide more positive outcomes in the long term than delaying action.

The full report can be viewed here 

Price Update

NZU prices continued to hover just below the $21.00 mark for most of March, but we have seen a slight increase through the first week of April, with trading currently at $21.20 (as at 9th April). There still doesn’t seem to be a lot of excitement to sell at present, even with forest owners starting to pocket their latest entitlements of units.

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