Govt to cap purchase of offshore carbon credits under ETS

Wednesday 11th April 2012

The government is signalling a move against the widespread purchase by major carbon emitters to buy cheap international carbon credits rather than using New Zealand-based units derived from activity that either offsets or reduces total carbon emissions.

The announcement came from Tim Groser in his first speech as Climate Change Minister since taking over from Nick Smith, who resigned his portfolios in a scandal late last month, to an Iwi Leaders’ Forum meeting.

“The government proposes to enable in legislation the introduction of a mechanism that would place a restriction on the proportion of international units a participant can surrender to meet their ETS obligations,” Groser said. “Under current settings, there is a serious danger of NZ essentially exporting capital for no good reason resulting in a loss of economic welfare."

The issue has become acute since a collapse in the value of international carbon credits brought on by a combination of reduced industrial activity in Europe and a flooding of the global market with Carbon Emissions Reduction units under the European ETS.

Groser issued a consultation on proposed changes to the ETS, including the introduction of more explicit powers to auction NZUs within an overall cap and provide for restrictions on the use of international units, both subject to consultation on the detail.

As anticipated, it also proposes a more gradual phasing out of transition measures between 2013 and 2015 for those industries covered by the ETS – transport fuels, electricity generation and industrial energy plant – in three equal steps.

The discussion document proposes maintaining the $25 fixed price per tonne of carbon under the ETS until at least 2015 rather than accepting the recommendation from last year’s ETS review panel report that it should increase by $5 a year.

Also included are proposals to allow greater flexibility for land conversion to its highest value uses by allowing offsetting of deforestation on pre-1990 forests, while also reviewing the number of compensatory NZUs available to pre-1990 forest owners.

It also would provide for delaying the entry of emissions from animal livestock and fertiliser use for up to three years if certain criteria are not met, following a review in 2014.

The consultation document also proposes providing for an extension of the fixed price option beyond 2015 to align with any price ceiling set under the Australian ETS, assuming the two schemes are capable of being linked.

(BusinessDesk)

BusinessDesk.co.nz

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