Carbon markets and the ETS ReviewFriday 11 Aug 2023
NZUs firmed on that news all the way back to the $65 mark, but didn't stay there, and have traded a range this week from $55 to $61. The last few days it seemed that there was something of a stand-off round the $60 level, with buying interest on our screen sitting shy of this, but no significant offer volume emerging until that "better" psychological level of $60. NZUs are there or thereabouts at the moment. Volatility seems to be a constant in this market, with NZU holders' key concern the ETS Review consultation, responses to which are due today. The release of that consultation document mid-June saw NZUs come off sharply, falling from $60 to below $38 within a three-week period. Option 3 of the document posited applying restrictions or conditions to forestry NZUs "to make removal NZUs less attractive and increase the demand for other NZUs sold by the Government". Option 4 suggested two NZ ETS markets with separate prices: one for emissions reductions and another for removals. That option could see emitters unable to use forestry NZUs to ‘pay’ for their emissions. "Instead, carbon removals would be sold directly to the Government or on a separate market." We very much want to see gross emissions reductions alongside sequestration. But, looking through those ideas to “improve” the ETS, there is perhaps insufficient comprehension of - or worse, actual disregard for - the large number of commercial contracts already in place into the future. The consultation document itself appears to be predicated on a number of critical assumptions. Some of these need to be updated, others grounded in evidence, or at the very least re-evaluated against the current context. The contention is that the ETS to date has not, and will not work to deliver any significant real gross emission reductions. Indeed, there is little evidence that it has. However, having only fleetingly touched into the $80s late last year, we would ask a different question - where is the evidence that it won't? Very few of us want to rent forever if we can buy our own home. And those running emissions-intensive assets surely feel the same way. But timing matters. A further implication of this consultation, or at least its portrayal by some in the media, is that we do not need more forestry, or that exotic forestry for sequestration is "bad". Here, we also approach very dangerous territory. We understand and support the need to get the right tree in the right place. And that must be done. But it must not be done by turning off the investment tap into sequestration. Of that, we need more, not less. More >> And the Forest Owners Association wants the government to put an immediate hold on a reform of the Emissions Trading Scheme (ETS) to restore stability to the carbon market and certainty for forest planning. See yesterday’s media release Source: Carbon Match, Forest Owners Association | ||
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