Participants in New Zealand’s emissions trading scheme surrendered 36% fewer units for 2014 compared to the previous year, as fewer forest-owners reported emissions, government data showed Thursday.
ETS participants handed over a total of 29.8 million emission units for 2014, compared to 46.6 million in 2013, according to an annual ETS report released by the EPA.
The drop was due to forest-owners only surrendering 10.1 million units for 2014, 63.5% or 17.6 million fewer than in the previous year.
Forest-owners are not required to report emissions and surrender units every year, and the lower number of permits submitted for 2014 is likely to be a result of the government plugging the loophole for post-1989 foresters that had allowed them to swap NZUs for cheap UN offsets.
Emissions from the ETS energy sector rose 10.6% to 21.2 million tonnes of CO2e in 2014, while carbon output from the liquid fossil fuels sector increased 1.5% to 16.7 million tonnes.
Unsurprisingly, 96.8% of the surrendered units were UN offsets, which traded at below 10 NZ cents throughout the year, compared to the domestic NZUs, which cost NZ$4-6.
The 2014 emissions year was the last time New Zealand emitters could use the UN offsets to comply with the scheme. From this year on, they can only use NZUs, which market participants say will lead to stronger demand and higher prices for the allowances.
But in the short term the market is over-allocated, as emitters that have received NZUs from the government have been hoarding them for years, instead using UN offsets for compliance.
The EPA data suggested the historical NZU surplus increased in 2014. The government allocated 4.48 million NZUs to industrial sources, but only 240,000 were used for compliance, meaning 4.24 million remain in company accounts.
Meanwhile, the government issued 11.38 million forestry NZUs, while only 700,000 were used for compliance. Most of the issued forestry NZUs went to post-1989 foresters, who will have to surrender them when their forests are harvested.
By Stian Reklev – email@example.com