BNZ Carbon NewsFriday 20 Jan 2012  The big news domestically over the last month was the announcement of a ban on HFC23 and N2O (industrial gas) CERs from June 2013. The move is in line with the European move to ban industrial gas CERs, and shows that the Government is willing to make changes to ensure the NZ ETS is robust. Industrial gas CERs are being banned because of a lack of integrity in the creation of many of these units. They are generated at a very low cost from turning HFC-23 into HCFC-22, which is also a greenhouse gas. There is speculation that the units are so cheap to create that some factories have increased production principally with the aim of creating more CERs. In New Zealand, emitters that hold industrial gas CERs that have been purchased forward prior 23 December 2011 will be able to surrender them up until May 2013, but they will be ineligible for surrender from June 2013. OMFinancial has been quoting prices for “greened” and “non-greened” CERs, these respectively represent non-industrial gas and industrial gas CERs. Since the ban, the spread between NZUs and “greened CERs” has narrowed to the point where they are effectively trading in line with each other. Despite this ban prices have continued to fall, NZUs are now trading at $6.65. At this price there is a substantially reduced incentive mitigate climate change through planting forestry or reducing production of greenhouse gasses. Following Europe’s highest court ruling that the inclusion of airlines into the EU ETS was valid, several nations and associations have objected strongly to the move, with China and the US in particular refusing to participate and even threatening retaliation. The Australian Government is seeking submissions on a paper to implement a “surrender charge” for international units to ensure they meet the Australian scheme’s price floor in the 2015 – 2018 phase. The price floor is intended to reduce downside price risk for investors by establishing a minimum carbon price in Australia. The surrender charge will ensure that the Australian cost of international carbon units is at least the floor price. Four options are being considered, varying from the charge being the difference between purchase price and the floor, to being based on the difference between the spot price and floor on surrender date.  |
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