ETS decisions will 'bury' carbon market for years
"Why has the carbon sink value of the NZ bush never been evaluated?"
Featured commentBUSINESSDESK: Government decisions to leave the emissions trading scheme at current settings indefinitely means the New Zealand carbon market has been "buried in a six-foot hole".
So says Nigel Brunel, head of carbon and energy trading at OM Financial, of yesterday's decision.
While Carbon Match principal Lizzie Chambers says "suspended animation" is more accurate, the impact of the government's ETS reform decisions will likely keep international carbon emissions reduction units (CERs) cheaper than New Zealand-produced Units (NZUs) for the foreseeable future.
Even with a likely drop in the price of NZUs, which are trading between $6.85 and $7.05 per tonne of emitted carbon, offsetting carbon emissions by buying offshore credits will make more sense for a major emitter than investing in NZUs.
A price drop is expected because the announcements left some major emitters in the electricity, heavy industrial and transport sectors holding more NZUs than they need because their ETS will be unchanged, instead of rising as expected.
Mr Brunel said "the premium of NZUs over European carbon has been a bit fake because there's no supply of NZUs to push it to a discount" and major emitters were now sellers.
"The carbon market is now in the lap of Europe and the control of the banks" as the latest changes would discourage active involvement in the New Zealand carbon market by carbon-intensive industrial players and plantation foresters, at least until depressed global prices revived, he said.
Under the ETS as originally announced, major emitters would have faced the full $25-per-tonne maximum price of carbon for every tonne of emissions, instead of the $12.50 a tonne they have faced since the scheme began in 2008.
Global CER prices have since fallen below $6 a tonne, leading to the unexpected outcome of international units costing less than NZUs.
That will only be fixed when a glut created by distortions in the EU carbon market is removed under negotiations requiring unanimity among its 27 member states.
The prospect of such reform before 2016 was "very limited", meaning a four-year wait for New Zealand, which has the only functioning ETS outside Europe, Ms Chambers said.
"It seems that our government is happy to let European policymakers be our masters indefinitely."
Ms Chambers had argued that this week's ETS decisions should have included a mandatory proportion of carbon offset purchases to incentivise carbon-reducing action in New Zealand, build a viable carbon market and give the country a source of local carbon units, akin to energy security planning.
Such restrictions are in place in Australia, where a carbon tax was introduced two days ago as a prelude to an ETS in 2015.
However, Mr Brunel said it was hard to fault the government's logic in putting an indefinite holding pattern on the ETS's existing, so-called transitional arrangements, and "taking out all the dates", as one carbon market observer put it.
"It's not the government's fault the price of carbon is where it is,” Mr Brunel said.
“They've done a bloody good job to date with the ETS, but we thought we were turning a corner, and it's turned out there's another long straight. It's pretty gutting."
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Comments and questions20
Could you think of a better place for this carbon nonsense than: "The carbon market is now in the lap of Europe and the control of the banks"?
And that gives you the "Three Stooges", with backing accompaniment by Fat Al and the Gorons.
Bliss
I am sick and tired of hearing from these people who just want to make money out of the ETS scheme – they don’t add anything to NZ and cost us a fortune – just like banker s & lawyers and Stock brokers.
Time people from OM financial and the others woke up and stopped being so one eyed and realise that we are NOT causing global warming and we are Not going to do anything that will help reduce pollution as long as China couldn’t care one iota
This whole ETS is nothing but a money making scam for some people who have nothing better to do and no thought to the huge and unreasonable costs imposed on New Zealanders.
Kill it properly is the only right thing to do.
Anyone who is "gutted" by this, deserves to be.
Mr Brunel, as head of carbon and energy trading at OM Financial, obviously wants to make money from the ETS scheme - should it be any surprise he is "gutted" by this? He has a vested financial interest in wanting the decision to go his way.
Hooray!
Let us hope it stays buried;and that John Key keeps Chief Wizard Smith out of his ear.
The Emissions Trading Scam is something we can well do without;Govt should devote it's energy to more important matters like getting some growth going.
liberte
Why has the carbon sink value of the NZ bush never been evaluated? What ever happened to Acid rain? Another fiasco!
It disappeared after governments force companies to stop using high sulphur coal and install sulphur scrubbers in the smoke stacks.
Please explain what you meant by “fiasco”?
There was something of a scare in the Northern Hemisphere around 1980 when the notion took root in some people'sminds that burning coal containing sulfur was causing a significant increase in acidity of rain, in turn increasing the acidity of lakes and damaging trees.
The US public and politicians became so obsessed with this theory that it set up the "National Acid Precipitation Assessment Program (NAPAP)" and spent many billions of taxpayers' and energy customers' dollars were spent on sulfur scrubbers and chemical treatment of lakes to "restore" the acidity to what was believed to be "correct" values. Eventually the research was done to test the theory and it was found to be false. In particular, the effect on trees was mis-estimated (both roots and foliage issues) and the lakes that were "clearly acidified by sulfur" were found to have been acidic long before the burning of coal; the acidity is controlled by soil and vegetation. The NAPAP recognized the error and the matter appeared to be closed, though not before many billions of dollars were spent and costs to consumers went up by several billions of dollars per year thereafter.
However, the matter did not stop there, and political issues took over. Under pressure from the Greens, the NAPAP underwent major re-organisation at the top level and a re-written report was issued in 1990, and yet another in 1996, after which I lost track. Some of this political football game has come about because the chemical process which removes sulfur dioxide by reacting it with limestone to produces carbon dioxide, which came to take over the role of Satan Gas previously occupied by sulfur dioxide.
So the acid rain fiasco, like many before it, was eventually exposed as yet another Mencken scam, in which the population is made to feel scared that some catastrophe is under way or imminent, and that it may be averted by handing over a few trillion dollars to an elite priesthood who alone are granted the supposed wisdom and foresight and perception to identify the culprit, and who alone, in consideration of the fee, will avert the catastrophe. In due course each supposed catastrophe is exposed as a phantom, and the elite move on to new catastrophe or re-work an old one.
One occasionally comes across references to the fiasco in old school textbooks, and the theory is still held as reality by some Greenpeace sects in California and Melbourne, who to this day believe and preach to the converted that banning high sulphur coal and installing sulphur scrubbers was an effective and acceptable counter-measure and saved all the fishes in the lakes and kept the forests alive.
Once Gina gets hold of Fairfax it should be the end of this trendy lefty nonsense
I know what I would like to do with carbon traders and it involves a lot of tar and feathers.
Aye, and could someone please tell me why the carbon sink value of the NZ pastures have never been evaluated?
I suppose it’s because pastures are there to fee animals. The carbon they absorb is there converted into meat & milk which is returned to the atmosphere after not too long.
Oh and methane which is a strong greenhouse gas.
However increased biomass is a negative feedback to increasing CO2 and increases the planet's food supply.
"The carbon they absorb is (there)sic converted into meat & milk which is returned to the atmosphere after not too long."
Whilst the pasture is still growing and absorbing carbon??
Why hasn't the maths been done?
Watch Winston Peters come out and say he will remove the ETS.
Anyway, once the red headed devil liar across the ditch is gone, how can we have anything that looks like a carbon BS tax and the Aussies don't ?
What makes me retch is the likes of Branson also riding the bucks of the whole BS to get more Virgin Atlantic sales. Is there no end to the hypocrisy here?
Thank God the Chinese, Indians, Canadians, Australians, Indonesians, Malaysians to name only a few will have none of this nonsense to contend with, and these will become our major trading partners.
Please explain what you mean by the Chinese “have none of this nonsense to contend with”? The Chinese are investing heavily in non-fossil fuel energy technologies, they have targets that far exceed ours, and are currently producing only about a quarter the green-house gasses per capita that we are.
We are being left well and truly behind by the Chinese.
The Chinese have none of these phantom scares and consequential economic self-mutilating regulation and so are hitting their targets of a couple of new fossil-fuel power stations per week. The investment in technology was a bubble based on the massive *export* market in wind-turbines and solar photo-voltaic panel formed by the EU and the US, created entirely artificially by Feed-in Tariffs and subsidies that grossly distorted the market. Now that the incentives have been dropped or greatly reduced, the market has collapsed.
The general level of energy consumption in China is still far lower than in the EU and US as a result of much less industrialization. That probably accounts for the Chinese having much lower per capita production of carbon dioxide than elsewhere, but this will doubtless rise as a result of modernisation of manufacture.
' per capita ' is the new measurement mantra for the tree huggers, because their relative country carbon totals of NZ and Aust in fact all southern hemisphere countries combined are so globally miniscule,
they hardly figure - will never figure in more than 10% of carbon production.
I think the government is just biding its time until the Swiss CERN research proves once and for all that earth's temperature is controlled by the sun's effect on cosmic rays . That will take a few years. Then the whole AGW ETS nonsense will quietly be buried with all the protagonists saying 'it wasn't me' . By then the current crop of politicians will have gone. The bureaucrats will remain unaccountable. UN will have finished its 20 year take-over of local government and bypassed sovereign governments completely as per Agenda 21 already part of former Waitakere and Auckland Council’s agenda. Don’t know Agenda 21? It is time you looked up Agenda 21.
United Nations...Agenda 21. Just ask Len Brown about what he is being fed. Notice he is 'dropping' the UN buzz phrases (Clark started dropping the phrases in her last term; 'sustainable growth'; 'biodiversity'; 'waste minimisation', etc....) Now Len has taken up the cause...the under ground rail system...must get the citizens onto public transport (part of agenda 21)
The ETS ....nothing more than the biggest scam this earth has known..Think about it.. The most significant factor in atmosheric temperature is Methane, a gas which is produced naturally. We humans have no control over degradation of vegetable matter or animal ablutions. Because methane doesn't fit with all things brought about by humans, lets pick on carbon...Oh no that means pollutants from industrialisation, internal combustion engine, etc,etc. UN has seized upon the opportunity to 'spook' the population and start charging for all that terrible carbon..the ETS...."Oh, we (the UN) have a great tax scheme running and we can make mileage out of this...remember money is power"! The Un again..".Lets become the 'keeper' of the globe because we now have power...why not become the 'world government'" !! Done!!...What a scam!! By the way...the global temperatures have not risen over the last 25 years...the global temperatures are cyclical. Where is Al Gore these days...Oh I forgot, he made a heap of money out of preaching the 'sky was fallin in on Pooh Bear' and now he's on to the next big money making opportunity.
By the way Chinas' population only has a smaller carbon footprint per head of population than NZ because 100s' of millions are still subsistance dwellers. Just travel through China to experience the filth, pollution, acid rain( if you don't believe in acid rain I can assure you it is real), rivers running black like sump oil, the soil is 'dead' in a lot of populated areas.....and we agonise over our negligable carbon foot print ??? But then again carbon is not the problem, lets not forget that.