Forestry and the Emissions Trading Scheme

Climate Change Response (Emissions Trading Reform) Amendment Bill

The Government worked swiftly to announce more detail on the proposed Emissions Trading Scheme reform once the 31 May surrender deadline had passed. On Tuesday 2nd June a massive amount of information was released, among which were the following key details:

  1.  The interim increase of the Fixed Price Option (FPO) to $35 was confirmed to be implemented for 2020 emissions (surrendered in 2021). Also confirmed was the use of the FPO during the transition to auctioning.
  2. The Government has taken on many recommendations made by the Environment Select committee, including delaying implementation of many forestry-related changes by 12 months to ensure adequate time to develop the details required in Regulations.
  3. More detail has also been provided that sets the provisional emissions budget, auction volumes and timing, and price control settings.

Subsequently the bill had its Third Reading on 16 June, and received Royal Assent on 22 June. A number of changes commenced on the day after Royal Assent, while others (including many of the forestry changes) will commence over the next two years.

More information can be found here.

Price update

NZU spot pricing jumped $3.00 to $28.00/NZU at the start of June after the first of the announcements above. Reasonable volumes traded initially, but selling eased and prices have continued to move forward. By the 9th of June we saw pricing reach $30.00/NZU for the first time, and traded as high as $32.00 in the middle of the month. Prices have traded a range around $31.00 - $31.75 towards the end of the month.