NZ ETS to restrict Kyoto Protocol units from 2015

New Zealand's emissions trading scheme won't be able to trade certain international Kyoto units after 2015, due to the government's decision restricting access to those markets after the stalled climate change negotiations.

From June next year, ETS participants will need to surrender New Zealand Units to meet their obligations after the government decided it will only allow Kyoto Protocol units to be used to account for obligations until May 31, 2015, Acting Climate Change Minister Simon Bridges said in a statement. The affected units are Kyoto Protocol first commitment period Certified Emission Reduction units, Emissions Reduction Units or Removal Units.

Bridges said the current hold on issuing Letters of Approval for local entities to participate in clean development mechanism projects will continue, meaning the ETS will operate with restricted access to Kyoto markets from 2016.

"Decisions in the international climate change negotiations in Doha last year, including restrictions on New Zealand's ability to trade any international Kyoto units after 2015, and the lack of action on international markets at the recent Warsaw negotiations, have contributed to uncertainties within Kyoto markets," Bridges said.

"The government considers international markets an important component of the Emissions Trading Scheme, and intends to review the level of access to international markets within it when international market conditions are better suited to New Zealand's domestic circumstances," he said.

New Zealand abandoned the second commitment period of the Kyoto Protocol last year, preferring to back a competing initiative including powerhouse economies, the US and China.

The decision comes the same day Crown accounts for the four months ended Oct. 31 showed the government wore a $210 million loss from the ETS, mainly due to New Zealand Unit carbon prices rising to $3.65 by the end of October from just 24 cents in May.

The Treasury also lifted its provision for ETS credits to $389 million from the $164 million forecast.

The ETS was implemented with a $25 a tonne cap to protect emitters if carbon prices went higher than that, though the lack of restriction on the number of carbon credits that can be sourced offshore to offset local carbon emission obligations has meant prices have been near rock-bottom rather than the reverse.