NZETS Gaming prohibited

May 22, 2014

The New Zealand Government budget delivered May 15 prohibits forest owners from exiting the NZETS by surrendering non NZU units. Designed to prevent arbitrage by forest owners selling NZU for $3 then surrendering ERU or CER thereby taking a significant margin and existing the scheme the legislation gave no warning to stamp out a practice that is becoming more widespread.

You can still use Kyoto units (including Emission Reduction Units) for harvesting and deforestation of forest land registered in the NZ
ETS; and for repaying over-allocated units until 31 May 2015. You can also resell them to industrial emitters and pre-1990 foresters who are deforesting until 31 May 2015, or sell them to overseas buyers.

for more information refer to the Sustainable forestry bulletin #50

http://www.mpi.govt.nz/Default.aspx?TabId=126&id=2260


Permanent Forst Sinks Initiative PFSI – scheme review

May 18, 2013

We attended a consultation round on the PFSI this week – Sustainable Forestry Bulletin Issue 44 – May 2013

If you are a participant in the PFSI as a forest owner or purchaser of PFSI AAU we strongly suggest you attend the consultation.

Given the recent changes at DOHA and the New Zealand Government’s decision to opt out of CP2 and join nations in a group outside the Kyoto Protocol the Government triggered a notice period to allow PFSI participants to opt out. Notice of opting out must be completed on the correct form by the 30th June 2013

The opting out of CP2 means that in 2012 the Government will not be able to issue AAU to PFSI participants. The reason why AAU were issued in the first place is the PFSI was a revision of the Forest Act 1949 and preceded the NZETS legislation that created NZU units and the ETS to comply with the Kyoto Protocol CP1.

The Government wishes to continue the PFSI post 2015 and will therefore have to issue a different type of credits – but which type? Or should a new type be created?

The consultation meeting in Christchurch was interesting in the facts and opinions offered:

The facts:

  • 88 Projects approved in CP1, 20,000ha under covenant and 1.2m AAU issued
  • Significant co benefits of the PFSI including biodiversity, erosion control, water quality improvement, flood mitigation and cultural benefits
  • Most applications occurred in 2011-2013
  • Indigenous forest dominated in later years comprising 90% of the applications by area

Opinions

There were various discussions on the value of AAU with international units in the cents. However sellers reported PFSI AAU being seen has having integrity and achieving prices above those of an NZU or other kyoto units (CER 0.40, ERU 0.14)

Discussion focused on how these high quality offsets could be differentiated? Discussion covered revisions to the NZEUR and traceability of projects to allow purchasers to see the projects that resulted in the credits being created.

Opinion was divided on what unit should be issued, given all units are supposed to be fungible but this in practice has been rarely correct. A PFSI unit was preferred ahead of issuing NZU on the basis buyers could distinguish the quality at a glance – gold standard CER was raised as an example of this.

EITG view is that irrespective of the unit issued purchasers will need to be educated – whether is a gold NZU or a PFSI unit neither will be immediately understood. This of course is a common theme in New Zealand’s marketing of any product – compare with the ‘kiwifruit’ and then the gold version of the same

PFSI participants need to move quick to get submissions in for 5th June to allow Ministers to receive advice and create policy. Those opting out need to move before the 30th June.


Doha Decisions on Kyoto Surplus Explained by Carbon Market Watch

March 25, 2013

At COP 18 in Doha at the end of 2012, Parties decided how to deal with the large surplus of Assigned Amount Units (AAUs) from the first Kyoto commitment period (CP1) and how to prevent the accumulation of new surplus in the second commitment period (CP2) of the Kyoto Protocol.

Carbon Market Watch just released a policy brief that explains the decisions that were taken in Doha and examines their implications. You candownload the Carbon Market Watch policy brief here. For a shorter article that explains the issue to people not as familiar with the topic, see theCarbon Market Watch newsletter article from March 2013.

The compromise adopted in Doha has two main elements relating to surpluses from the first and second commitment period.

1.    The decision does not limit the carry-over of surplus AAUs from CP1 but puts limits on their use in CP2. It also makes it impossible for countries without a reduction target in CP2 to sell their surplus to countries with a reduction target. In other words, Russia and other countries with surplus that do not join CP2 will not be able to sell units to CP2 countries. To underline their climate commitments, several countries made political declarations that they will not buy AAU surplus from CP1 in CP2.

2.    Countries also decided to restrict the initial assigned amount (the number of AAUs a country initially receives for CP2) in order to avoid the build-up of new surplus. This amendment makes it impossible for countries to accumulate new surplus AAUs. This amendment may set an important precedent for future decisions on target setting.

The decisions on use restrictions of AAU surplus that were taken in Doha are complex. The newCarbon Market Watch policy brief  tries to explain the issues in a balanced way and discusses the impacts of the Doha surplus decisions on the second commitment period and beyond.

Please do not hesitate to send us comments or questions.

Thank you!
Anja Kollmuss on behalf
ofCarbon Market Watch


Consultation on the application of carry-over for New Zealand Emission Trading Scheme Participants

March 4, 2013

The New Zealand Government is seeking feedback on the application of the international carry-over rules within the New Zealand Emissions Trading Scheme (ETS). These rules place a restriction on the number of certain types of units which can be carried over from the first Kyoto Protocol commitment period (CP1, 2008–2012) and be valid for use subsequently. This does not impact on NZUs.

International carry-over rules require units which are not carried over to be cancelled. We anticipate the carry-over of units will occur after the 31 May 2015 ETS surrender deadline. However the Government is consulting on this issue now to provide greater certainty to ETS participants and to allow them to plan their compliance purchasing and surrendering appropriately.

The Government must decide to what extent, if any, New Zealand’s 2.5 per cent international carry-over entitlement for Certified Emissions Reductions (CERs) and Emission Reduction Units (ERUs) is extended to individual account holders.

Information received through this consultation process will allow the Government to better assess the potential impacts on account holders of the various options set out in the consultation document. We recommend that any NZEUR account holder with Kyoto units in their account read through the consultation document. The consultation will be open from Monday 4 March to 5 pm Friday 29 March.

Further information

For information regarding Kyoto units and rules

For information regarding access to international units from 1 Jan 2013


Z Energy in Row over NZETS Charges

February 5, 2013

Confirming a long held belief that energy companies and power companies are charging more than it costs them to meet the NZETS, OceanaGold has refused to pay Z for its diesel citing the fact it is is being overcharged for the carbon content.

In Australia it was made clear by the regulator that it would not tolerate overcharging for carbon, the same sort of comment was made by the New Zealand Commerce Commission. However its been clear to commentators for some time that after the collapse of NZU prices the consumer is still paying much more for their emissions than the real cost of carbon credits. Someone therefore appears to be profiting from this. Is that wrong?

According to the New Zealand High Court, no. In the following release from Scoop http://www.scoop.co.nz/stories/BU1302/S00151/z-energy-in-stoush-over-cost-of-ets.htm the judge appears to see nothing wrong with Z action.

It seems that someone has missed the point that the energy suppliers justified price increases on the back of the NZETS, were warned not to profit, and are alleged to have done just that!

New Zealand consumers should be used to this sort of treatment though, the power companies have been repeatedly chastised for overcharging consumers for electricity. Any action? Not that we can see, and will it be the same in this case?


ETS foe pays $1.4 million premium

January 28, 2013

Monday, 28 January 2013, 11:35 am
Press Release: Carbon News
ETS foe pays $1.4 million premium

A company ideologically opposed to the Emissions Trading Scheme is thought to have paid $1.4 million more than it needed to to meet its carbon obligations last year, according to Carbon News.

The scheme allows emitters to either surrender a carbon credit or pay the Government $25 for every two tonnes of emissions.

With carbon prices at around $6 a tonne at the May 31 surrender time last year, the vast majority of emitters chose to surrender credits.

But latest figures on the Government’s Emissions Unit Register show 73,575 tonnes of emissions in the 2011 year were covered by the $25 payment.

Carbon News says that means that emitters paid more than $1.8 million for emissions that they could have covered with $440,000 worth of carbon credits.

It is understood that most, if not all, the 73,575 tonnes of emissions came from one company operating in the mining industry.

Sources say that the company is fundamentally opposed to the ETS, and has implemented a firm policy of not taking part in the carbon market


NZETS bans large scale hydro CER and industrial process ERU

December 18, 2012

The New Zealand Government has announced new restrictions on the surrender of certain international emission units will come into effect on 18 December 2012.
The restrictions affect Certified Emission Reduction units (CERs) and Emission Reduction Units (ERUs) generated by large-scale hydropower projects and ERUs generated by industrial gas destruction projects.
Affected units brought into the NZEUR after 17 December 2012 will no longer be eligible for surrender or repayments to meet an obligation with the NZ ETS. Units brought into the NZEUR through a forward contract that has been registered with the Registrar by 11 February 2011 will be eligible for surrender until 1 June 2014.
More information on the ban, including a guide to identifying banned units and further information regarding the registering of forward contracts, will be uploaded to the NZEUR website shortly (www.eur.govt.nz)


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