BUSINESSDESK: New Zealand's acceptance of carbon credits banned from the European Union's emissions trading scheme means major industrial greenhouse gas emitters face half the cost liable in Europe and other countries implementing carbon-pricing schemes.

ETS broker and commentator Lizzie Chambers says in her weekly Carbon Match newsletter that three types of carbon credit – known by the acronyms CER, ERU and RMU – face restrictions in the EU's ETS but remain "good tender" in the New Zealand ETS.

The value of such credits has sunk on global carbon markets to around half the value of EU-compliant credits.

These credits can "only be used in small proportions by emitters in the EU ETS", Ms Chambers says. "The logical thing from an emitter's perspective is now to … switch into [such] units wherever possible."

Electricity generators, oil companies and non-exporting energy-intensive industries are on the hook for the cost of negating one in every two tonnes of carbon emitted each year, with an upper limit price of $25 a tonne.

However, over-supply and dysfunction in the EU ETS have sent carbon prices available to New Zealand emitters plunging to around $8 a tonne late last year and as little as $5 this week.

"The idea that we face a European carbon price here in New Zealand is not correct," she says. "This year it should be possible for emitters to achieve below half those levels.

"Know the rules, and work with what you've got," says Ms Chambers, who is critical of New Zealand's "lack of ambition" on actual climate change action.

Where other countries were creating opportunities to spend ETS funds on carbon-reducing projects, New Zealand was relying on foreign-derived carbon credits traded in the ETS.

"An ETS which does nothing but drive cash offshore is not consistent with that and will ultimately represent a terrible loss of what could have been really dynamic capital," Ms Chambers says.

Ollie Belton, of Christchurch-based Permanent Forests International, notes foreign carbon is already the "credit of choice" last year, as shown by the release of surrender information for the first calendar year of the scheme's operation.

"Worryingly, the cheapest international units were used in abundance. ERUs and RMUs trade at a discount to CERs and accounted for over 44% of all units retired," he says.

Some 3.17 million RMUs were surrendered under the ETS in 2011, around 20% of the total of 16.34 million so far. RMUs, or Removal Units, are derived from a little-known carbon offset involving Russian and Hungarian forests.

That compared to no RMUs surrendered in 2010, when the scheme had only run for six months.

"The NZ ETS is the only trading scheme in the world to accept RMUs," Mr Belton says. "So far only 3.9 million RMUs have been issued by Hungary and New Zealand looks to be the home for most of them."

Even greater was the contribution of 4.27 million ERUs (Emissions Reductions Units), from zero in 2010, which relate to offsets allowed in developed countries to underpin schemes that cut carbon emissions.

Certain ERUs contain the same industrial gases as are found in some CERs (Carbon Emissions Reduction) units and are banned under the EU ETS.

While New Zealand has followed the EU and banned CERs containing such gases from next April, it has not done the same with ERUs derived from the same banned gases.