NZETS again Dominated by CER Price
Back in late 2010 the NZU price was effectively capped by the price of Certified Emissions Reductions or CER from projects in developing countries. These units were purchased by emitters to cover their NZETS obligations. An arbitrage opportunity arose when the price of a CER climbed above that of an NZU in early 2011 creating a windfall for emitters who sold CER and purchased NZU in effect swapping their compliance units.
CER can be used for compliance in the EUETS as well as the NZETS
Again the price of a CER has dropped to NZD$19 according to Carbon Match, the new platform for selling and buying NZU units www.carbonmatch.co.nz
CER prices dropped with market uncertainty as to future demand from the energy sector the main drivers of the EUETS where CER are regularly traded.
Look for this and the exchange fluctuations to create further opportunity for New Zealand emitters and perhaps the occasional forest owner to drive a margin between the two compliance unit prices.
European Markets Buoyant then in Freefall
European carbon markets have been strong as the fall out from the Japanese nuclear accidents have resulted in Germany committing to shut down its nuclear stations. Projections for summer electricity peak use (based on air conditioners) suggest that wind and solar can take up the slack as needed.
In France the pressure to import electricity is driven by the ability to use river water to cool nuclear reactors. A drought will curtail nuclear output and result in a requirement to import electricity.
Meantime the Italians voted to reject nuclear power.
Recently the Greek crisis along with a number of other factors resulted in a significant drop in EUA prices from 16 Euro down to 12 in a week. With CER falling only 2 Euro reducing the EUA CER spread.
NZETS Forest Measurement Regime Regulations Announced
In keeping with the consultation the final regulations have been issued for the compulsory field measurement for post 1989 forests.
These regulations apply to participants with more than 100ha of post 1989 forest. The definition of participant follows the associated persons rules modelled on the tax legislation.
That means an aggregate 100ha triggers the obligation to undertake compulsory field measurements once ever commitment period, and in this case before 2012.
MAF supplies details of the sample plots and the forest owner is required at their cost to supply the data. MAF then supplies a set of site specific look up tables to be used in calculating the NZU units for the forest.
Post 1989 forest owners with over 100ha face significant risks, that the customised look up tables provides fewer NZU than those from the standard tables.
Had the forest owners sold their NZU allocation based on the standard tables from 2008-2011 they will be required to make an adjustment at their 2012 emissions return.
If the forest is patchy and not well managed the random sample plots allocated by MAF may significantly reduce the actual NZU issued requiring the forest owner to potentially purchase units on the market.
Public Opinion against Australian Carbon Tax, Mentions of Trans Tasman Trading
Reports of Trans Tasman Emission trading raise the spectre of a revived CPRS
In a meeting between the Prime Ministers of New Zealand and Australia it has been reported that both prefer a trans tasman exchange of carbon credits.
Public opinion in Australia is against the proposed carbon tax mainly due to the excessive costs perceived by families. The understanding of the process and emissions trading per se was illustrated on television where the commentators questioned how a carbon charge would be imposed on running motor vehicles.
Clearly there is no understanding or appreciation as to where a charge may be applied and the practicalities of implementation of a scheme. It may be the public is thinking of how they can reduce emissions and see the need for being somehow personally accountable.
In the NZETS the carbon obligations are placed up stream with oil companies simply increasing the cost of fuel to reflect the cost of carbon. This would be the same for either the CPRS or a carbon tax. The proposed carbon tax however appears to focus on power generation only.
New Zealand advised that its NZETS is on track for an annual cost of about $150 per family. This is substantially lower that Australian estimates of a carbon tax, albeit that the level of the tax has yet to be set but in any event is above that of the NZETS NZU price.
One wonders if the Carbon Tax has simply been a ruse to push acceptance of the CPRS and it will after these revelations be looked at again.
Following those statements a tax relief package was announced for families with incomes under $150,000 AUD per annum to reduce the impact of the expected $500 per annum in carbon taxes. The figure was calculated at $20 AUD per tonne of CO2
Meanwhile both New Zealand and Australia at a sovereign level are reportedly able to comply with their 2008-2012 commitments with no domestic response or need to purchase off shore credits.
New Zealand is reportedly on track for its forest credits having issued some 57 million NZU to represent forest carbon sequestration. Australia, whose Kyoto cap is 1990 + 7% which was successfully argued on the basis of the then extensive deforestation, has since almost curtailed deforestation and hence benefits from that extra 7% per year.
Camels Sacrificed for Carbon Credits
Meantime it has been reported that a camel cull of wild camels in northern Australia has been put forward under the carbon farming initiative.
Shooting wild camels from helicopters using licensed sharpshooters will reduce methane emissions whilst supplying the pet food markets with camel meat.
Australia is a signatory party to the United Nations Convention on Biological Diversity (www.cbd.int). This was founded out of the same meeting the Kyoto Protocol came from; that is, the Rio Earth Summit in 1992.
Under its obligations to this agreement, Australia has committed to enacting the Convention. This includes the requirements of Article 8, In-situ Conservation, Paragraph (h) which states: “(…contracting parties are required to…) Prevent the introduction of, control or eradicate those alien species which threaten ecosystems, habitats or species”. Feral Camel meets the requirements for control as an alien species under the CBD. http://www.cbd.int/convention/articles/?a=cbd-08
Feral camels are having a massive impact on rare and endangered plants and animal species in the incredibly fragile Australian rangelands. Left unmanaged, the feral came populations will double, with a doubling of all impacts by 2020, including rate of loss of endangered desert species and greenhouse gas emissions. http://feralscan.org.au/camelscan/default.aspx
Apparently carbon credits will mean that using the camel meat becomes a more viable proposition for processing plants.
EU Moves to Close Registry Loopholes and Prevent Fraud
The EU Climate Change Committee backed proposals to enhance the integrity and the security of the EU ETS registry system submitted earlier by the European Commission. Support for the proposals is key to the security of the carbon market, which has become a priority as a result of the fraud with emission allowances and cyber attacks on registry accounts.
For a webinar on the subject go to www.environmental-finance.com/events
What is the Price of a Carbon Credit?
Several different markets exist: Kyoto Credits, Cap and Trade markets that are in come cases country implementations of the Kyoto Protocol that may permit Kyoto Credits as part of the compliance market, and Voluntary credits that generally are for marketing or ‘greening’ purposes by Corporations.
Prices and volumes vary based on the market and the markets are generally not linked and therefore it is difficult to see them as linked at all other than the Kyoto compliance markets.
Kyoto Offset Credits
Full details are at http://www.co2offsetresearch.org/policy/ComparisonTableMarketSize.html