BNZ Carbon NewsFriday 17 Feb 2012  NZUs have recovered strongly over the last month, albeit off a low base. Prices are now in the mid $8’s having been sub $7 only two weeks ago. Drivers of recent NZUs movements appear to still be European moves, with little else to drive it at the moment. Despite the low prices it appears the government is willing to take action to preserve the integrity of the scheme by limiting the volume of CERs imported. This proposal was announced at the Ministry for the Environments Briefing for “incoming” Climate Change Minister Nick Smith. The Minister cited a desire to limit offshore cashflows by reducing “the levels of international purchasing under the ETS in the short term”. If a limit is imposed, this would be in addition to the ban on importation of industrial gas CERs imposed from 22nd December 2011. There is a similar movement in Europe at the moment, with debate around plans to ‘set-aside’ as many as 1.4 billion EUAs in the 3rd phase of the EU ETS. The plan has been mooted in order to support the price of carbon by reducing the over-supply of EUAs. The move is important in order for the ETS to operate effectively as a low price for carbon does not drive carbon-reduction behaviours or investment. The plan has a long way to go, but is in front of the European Parliament. The major issues are: how to give the market comfort that this is a one-off event (and not part of ongoing intervention in what should be a market-based system); how high to force the price of carbon; and the overarching implications for the EU ETS as a whole. This goes to show that carbon markets are by nature very particularly politically driven, and it is not just NZ that keeps changing the goalposts.  |
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