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Forestry and the Emissions Trading Scheme

The NZ ETS Review commenced in 2015. Stage 1 of that review concluded in May 2016 with the decision to phase out the two for one surrender with full surrender obligations in place by 2019. Stage 2 of the review is ongoing with MFE work progressing to improve the design and operation of the NZ-ETS, including how best to implement the in-principle decisions (auctioning, international units, a different price ceiling, co-ordination of decision making), forestry accounting (averaging), industrial free allocations and operational and technical matters. Consultation on these areas is expected throughout 2018.

The first consultation document has been released and includes a number of proposed amendments to the Climate Change Forestry Sector Regulations 2008. These amendments address deficiencies in the current regulations, simplify processes and reduce fiscal risk to the Crown.

The proposed amendments relate to the following:

Significant Proposals:

  • Deforestation of post-1989 forest land between rotations
  • Reduce the need to update participant-specific carbon look-up tables
  • Allow extensions of time to collect and use FMA information

Minor and Technical Proposals:

  • Simplify carbon accounting
  • Areas less than one hectare
  • More detailed notices on land titles for post-1989 forest land
  • Improve the rounding rules for emissions and removals
  • Simpler rules for forests with mixed forest species and/or mixed ages
  • Calculating emissions after clearing post-1989 forest land
  • Field Measurement Approach – allocation of sample plots
  • Notification of status of pre-1990 offsetting forest land
  • Pre-1990 offsetting forest carbon calculation

PF Olsen are currently reviewing the proposed amendments and will prepare a submission on behalf of PF Olsen ETS participants.

The consultation document can be viewed online.

Price Update

After a sustained period hovering around record high price levels, we have seen NZU prices check back somewhat through the end of May and into June. Domestic emitters had a deadline of 31 May 2018 to complete their unit surrenders, and now pressure to acquire has eased. Buyers have therefore taken a breath, while sellers have remained in the market with fresh entitlements to offer. Current pricing (as at 8th June 2018) is around $20.65.

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