BUSINESSDESK: The peak Maori body advising the government on climate change issues says the weak provisions intended for the Emissions Trading Scheme are robbing Maori of hundreds of millions of dollars by depressing the value of New Zealand carbon credits attached to Maori forestry holdings.
The comments coincide with the value of a New Zealand Unit (NZU) dropping back below $3, a historic low point, for the second time in a month, as a glut of European carbon credits combines with New Zealand's policy to allow local greenhouse gas emissions to be offset by unlimited foreign-sourced carbon credits.
The Climate Change (Emissions Trading and Other Matters) Amendment Bill is due to be reported back to parliament by the finance and expenditure select committee tomorrow afternoon, with chairman Todd McClay telling BusinessDesk not to expect significant changes to key policy decisions.
That indicates no change to the government's determination to entrench existing transitional arrangements for the ETS indefinitely, while international consensus emerges around a new global deal on climate change to replace the Kyoto Protocol.
The protocol's first four-year commitment period ends this year, but efforts to sign up to second commitment period have failed so far and alternative global arrangements are emerging.
These trends reflect the increasing contribution of fast-growing emerging economies to carbon emissions and the unwillingness of developed countries to shoulder new costs during economic hard times.
Meanwhile, the European Union's ETS remains mired in over-supply of credits, which has seen carbon prices plummet and go lower this week with the release of a new tranche of Ukrainian forest-based credits.
The lowest-quality European credits, known as Emissions Reduction Units or ERUs, were trading below $2 a tonne today, with a buy price quoted by Westpac of $1.85 a tonne.
In an open letter to Climate Change Minister Tim Groser, the climate change iwi leaders group chairman, Apirana Mahuika, accuses the government of a "fundamentally flawed" approach which was undermining both the value of NZUs and the durability of Treaty of Waitangi settlements involving forests.
"The proposed government policy not to restrict cheap international unit imports cuts across existing Treaty settlements that will have assumed stable ETS policy," the letter says.
However, supporters of the government proposals equally argue it keeps ETS policy stable by refusing to intervene in the carbon market and pursuing a "least cost of compliance" for major emitters.
The transport fuels, electricity and stationary industry sectors which do not export are all required to buy carbon credits to match 50% of their annual carbon emissions at a maximum value of $25 a tonne.
Have sunk ever lower
When the scheme came into existence in 2010, it was assumed carbon prices would quickly go higher than $25 a tonne, but they have instead sunk ever lower, partly because of slow global growth and because of the European market oversupply.
That, in turn, is hitting the value of credits attached to plantation forests, with Maori-owned forests accounting for 30% of all credits on issue, making Maori the largest single holder of NZUs.
Pending Treaty settlements could increase that to around 38% of the total, the letter says.
At the current value of $3, the 30 million NZUs already issued to Maori forest owners is valued at $90 million, compared to $600 million if the carbon price for NZUs were $20, still $5 below the current price cap.
"Based on this analysis of current NZU holdings, the ETS policy prop0osed in the bill (with no import cap) will cost iwi interests between $210 million and $510 million.
"But the impact will materially worsen for iwi/Maori where the cost to iwi assets will rise to between $294 million and $714 million," says Mr Mahuika in the letter, which is widely copied to opposition politicians and key Maori bodies, although not including the Maori Council.
The iwi leaders groups and the Maori Council have been at odds over the government's approach to recognising Maori rights and interests in fresh water ahead of the partial privatisation of state-owned electricity companies.