New Zealand to launch ETS review this week

Published 04:08 on November 23, 2015  /  Last updated at 04:08 on November 23, 2015  /  Asia Pacific, New Zealand  /  No Comments

New Zealand will release the long-awaited discussion paper for reviewing its emissions trading scheme within a few days, Climate Change Minister Tim Groser has said, while dropping the clearest hint yet that the government aims to tighten market rules.

New Zealand will release the long-awaited discussion paper for reviewing its emissions trading scheme within a few days, Climate Change Minister Tim Groser has said, while dropping the clearest hint yet that the government aims to tighten market rules.

The ETS is due to be reviewed this year, but the government has been delaying the process, most likely in order to be able to take the outcome of the UN climate talks in Paris into account before making any final decisions.

But on Sunday Groser told TVNZ’s One News that a discussion paper will be released within days.

“I think it’s time to increase the speed limit a little. We are going to have a consultation so it’s premature to say how much,” the minister said.

The comment underpinned the bullish market sentiment in recent weeks that has contributed to pushing NZU prices up to three-and-a-half-year highs.

The spot contract closed Monday at NZ$7.80 on CommTrade, equal to the price last Thursday and not seen since March 2012.

Analysts have predicted that the 2-for-1 rule will be phased out and that the government will scale back the amount of free allowances emitters receive. Some expect an absolute cap on emissions might be introduced, but few think agriculture – which accounts for nearly half of New Zealand’s GHG emissions – will be included in the ETS.

Most observers expect the NZU price to continue climbing in the longer run although there is room for short-term drops.

“Views that there is an oversupply of NZUs in the registry is one-dimensional research and fails on many counts,” brokers OM Financial said in a note to clients on Monday.

“Yes, there are several million unencumbered NZUs in the registry held by EITEs and those who arbitraged the scheme up until August last year but in our view there are few, if any, emitters long NZUs that much beyond this year,” it said.

By Stian Reklev – stian@carbon-pulse.com

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