New Zealand has greenhouse-gas emissions trading market. As this issue of NZ Management went to press, news broke of the sale of the first New Zealand credits (called NZUs), and others are in the pipeline.
The trade is significant not only in New Zealand, but also globally; it’s the first sale of credits under an emissions trading scheme outside Europe, and is believed to be the first sale of forestry credits anywhere in the world.
The 50,000 units represent 50,000 tonnes of carbon sequestered in New Zealand forests.
They sold at $20 tonne – 20 percent discount on the international price of offset credits from emissions-reduction projects in developing countries, known as certified emissions reductions, or CERs.
This is not surprising, given that NZUs can be used only in New Zealand (unless they are converted to Assigned Amount Units, or AAUs, which requires regulatory approval), and the New Zealand market lacks the liquidity and fungibility of international markets.
Details of the buyer and seller are being kept confidential, but trader Nigel Brunel, of OMFinancial, told NZ Management it was New Zealand buyer. It’s possible the units have been bought by speculator, but it is more likely that it was large industrial emitter keen to start building portfolio of credits against the time when the company has to start surrendering credits to offset emissions.
The sale is reminder that, despite perceptions, New Zealand’s emissions trading scheme is in force.
The scheme, brought in late last year by the Labour government with the support of the Greens, New Zealand First and the Progressives, is being reviewed by special select committee as part of confidence and supply agreement between the National and Act parties. However, the new Government stopped short of suspending the scheme, as it originally intended, which means the scheme is live.
The forestry sector – the first to come into the scheme – had until March 31 to register for credits for 2008, and it is those credits that are able to be sold, subject to delivery from the Government.
This perception that New Zealand’s ETS is on hold, or might not even go ahead, appears to be having strong influence on the behaviour of many New Zealand businesses.
Mark Franklin, chief executive of TZ1, the NZX-owned global carbon registry, is reluctant to criticise New Zealand business for failing to come to grips with the rapidly growing world carbon market, but says that the conversations he has in New Zealand are “very different” from those he has with businesses in other parts of the world.
Franklin makes the point that, regardless of whether or not New Zealand businesses are forced into compulsory emissions market, many will be compelled by international market forces to either reduce or offset emissions, and says that carbon trading is the ideal forum for this.
TZ1 is rapidly emerging as world-leading registry of the voluntary carbon market, having recently been appointed as the registry for schemes such as the Canadian-based Emissions Credits International Corporation (which encourages farmers to sequester carbon through changed land-tillage practices) and British-based afforestation and forest restoration organisation Plan Vivo.
In fact, the NZX offshoot is doing so well that it is in the process of being bought by private London-based international financial information services company Markit.
The sale, for an estimated $66 million, is going through the due diligence process and will see the TZ1 operation move from Auckland to London. NZX will retain management interest in TZ1 for three years through shareholding in Markit and role on the TZ1 governance board.
Adelia Hallett is the editor of Carbon News, www.carbonnews.co.nz
