International carbon credits based on large-scale hydro-electricity projects and hydro-fluorocarbon destruction schemes in developing countries will no longer be accepted in the New Zealand emissions trading scheme if government recommendations are implemented.
Climate Change Minister Tim Groser announced a two-week consultation from November 19 on whether to ban Emission Reduction Units from HFC-23 and N20 destruction projects and Certified Emission Reduction units and ERUs associated with hydro projects.
The move is a sop to opponents of the government's amendments to the ETS, passed into law last week, which entrench transitional and concessionary arrangements for major emitters and the agricultural sector for as long as there remains no significant global agreement on climate change action.
Unlike other countries with ETS-style arrangements, New Zealand imposes no restriction on the number of carbon credits that can be sourced offshore to offset local carbon emission obligations.
That has given New Zealand emitters access to carbon credits at less than $2 a tonne in recent weeks.
The ETS was implemented with a $25 a tonne cap to protect emitters if carbon prices went higher than that, but such low prices were not contemplated at the time of its introduction.
Other countries implement restrictions of up to 50% on the local use of foreign-sourced credits to bolster domestic carbon prices and encourage investment in carbon-mitigating technology.
Mr Groser says the likely exclusion of the two types of credits named was intended to protect the integrity of the ETS. They could face a ban from either January or June next year.
CER units associated with hydro-fluorocarbon destruction have already been banned from the New Zealand scheme after evidence emerged of facilities being established in developing countries to create the substances, which could then be destroyed to collect subsidies.
Meanwhile, a decision to "backload" 900 million European Union Allowance credits may lead to some strengthening in global carbon prices.
The decision by administrators of the European Union ETS effectively withdraws units from trade in 2013 for reinjection into the market in 2019.
The move is intended to help deal with the glut of European carbon credits which is depressing prices worldwide.
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