Bennett 'taking advice' on cancelling 'dodgy' carbon credits

Climate Change Minister Paula Bennett is "taking advice" on whether to cancel some or all of the so-called 'dodgy' carbon credits bought mainly by power and petrol companies to cover New Zealand's future obligations to reduce emissions of greenhouse gases that cause climate change.

Asked on TVNZ's Q&A programme last weekend about whether the government would cancel any of the 122.2 million tonnes of 'dodgy' credits, Mrs Bennett said she was "not ruling it out but it's not my focus right now."

A spokeswoman for Mrs Bennett, who is travelling back from New York after an international signing of the global climate change accord hammered out in Paris last December, said the minister was "taking advice on this but won't be making any decisions in the next few weeks."

The Green Party is supporting cancellation of an estimated 122.2 million tonnes of Emissions Reduction Units, the residual overhang from a total of 495 million tonnes of carbon ERUs bought by New Zealand companies with obligations under the country's emissions trading scheme.

Most of those ERUs were sourced from former Soviet bloc countries, where the collapse and assisted closure of inefficient heavy industry produced windfall carbon emissions gains and became, according to a report for the Morgan Foundation, a breeding ground for falsified carbon credits created by organised crime gangs. ERUs were largely responsible for collapsing the price of carbon in New Zealand to near zero at times in 2011 and 2012, rendering the scheme meaningless as a spur to carbon reduction behaviour and making a mockery of the $25 a tonne upper limit imposed by the government to ensure adjustment to the ETS wasn't too economically challenging.

Some 372.8 million of these ERUs were surrendered when New Zealand had to meet the country's obligations under the First Commitment Period of the Kyoto Protocol, between 2008 and 2012, with residual credits of 122.2 million tonnes available to offset against emissions obligations through to 2020.

The Morgan Foundation estimates some 93.6 million ERUs would still be available after 2020 to apply against emissions reduction targets through to 2030.

Since the purchase of ERUs was banned from the middle of last year, the price of carbon in the New Zealand ETS has risen from $3 a tonne a year ago to settle in recent days above $13. Prices ran up sharply when it became clear the government will almost certainly axe the current subsidy for large carbon emitters – mainly electricity generators using gas or coal, transport fuel providers, and some heavy industry that isn't exposed to export competition – that requires them to buy only one tonne of carbon for every tonnes two emitted.

Plantation forestry owners regard $15 a tonne as a trigger price at which it starts to become commercially attractive to plant trees as carbon sinks to generate New Zealand Units (NZUs) under the local ETS.

Carbon prices fell slightly this morning to $13.10 a tonne.

(BusinessDesk)