What to do with those forests in the ETS?Friday 10 May 2013
"But it's too good to be true...isn't it?", "Pure speculation" say others. Well yes, perhaps it feels a little off to be opting out simply to avail oneself of the arbitrage. But actually, is this really speculative? In fact, we think that this is a prudent thing for all post-89 foresters to be considering, given the regulatory uncertainty that has impacted foresters to date. This is something on which all post-1989 foresters should seek specific advice. Forestry law specialists Duncan Cotterill are producing an advisory note on this matter which will be published imminently (so CarbonMatch will link to that note in their next weekly update). To sum up, we have the following situation: • Relatively high compliance costs - field measurement etc… • Low reward for participation; • A large overhang of NZUs - witness the 47 million NZUs allocated in respect of the second tranche of pre-1990 as advised in MPI's sustainable forestry bulletin - that alone should be roughly enough to cover NZ's demand from 2015-2017 inclusive under current ETS design; • No clear information on what the NZ ETS looks like post 2015, or what sort of price ranges we might see; • A limited window left during which foresters can access much cheaper international credits; and • The prospect of much higher carbon prices in the long run. The risk is that forest owners who don't seek advice on this option may in future find themselves in the position of having spent a lot of money to stay in the scheme, achieved little or no return for their involvement, but with costly liabilities beginning to crystallise over their post-1989 holdings. Source www.carbonmatch.co.nz | ||
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