19 Jan 2016

Cost of carbon going up

5:41 am on 19 January 2016

The cost of pouring greenhouse gas emissions into the atmosphere is going up.

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Under the scheme, businesses such as petrol companies that emit carbon dioxide must pay those that absorb it. Photo: 123rf

These costs are set by carbon traders operating under New Zealand's Emissions Trading Scheme (ETS).

The latest figures show they have reached their highest level in four years.

Under the ETS, businesses such as petrol companies that emit carbon dioxide (CO2) must pay money to businesses such as forestry companies that absorb carbon dioxide.

This works when forestry companies sell a so-called carbon credit on a carbon exchange and the fuel companies buy it.

These credits were once worth over $20 a tonne of CO2 but fell to $10 a tonne in February 2012, before dropping as low as $1.55.

Critics called this a paltry sum that did little to incentivise companies to clean up their act.

Carbon credits, however, are now back to the brink of $10.

One carbon trader, Lizzie Chambers, said this was a positive development.

"There's no question that the market is becoming more robust," she said.

"Emitters are not allowed any more to use cheap international units... The only units they are allowed to use are of New Zealand origin, and that is causing the market to deliver prices that might actually point towards lower carbon solutions."

Ms Chambers attributed the rise to last December's agreement in Paris for the whole world to reduce greenhouse gas emissions.

She said emitters thought New Zealand would have to lift its game in order to comply with Paris, and so it was wise to start taking measures now.

The rise in the carbon price was welcomed by the Forest Owners Association, whose members must plant trees if New Zealand's emissions are to be offset.

The association's chief executive, David Rhodes, said tree planting was not worthwhile when the carbon price was low.

He said a $10 price was a step in the right direction but more was needed.

"We did have a price of $20 a tonne at one stage and we were getting a substantial level of new planting at that level," he said.

"Some new planters come in earlier than that but many will be looking for something at about that level before they will commit to new planting purely on the basis of the price of carbon."

Higher prices forecast

Forecasts indicate these growers could get their way in the coming years.

A document issued by the Ministry for the Environment quoted estimates of $35 to $57 a tonne by 2030, though it pointed out this still fell short of what scientists said was needed.

The same document also noted that a special subsidy to greenhouse gas emitters, known as the two for one scheme, could be abolished, which would make them pay more cash for each tonne of emissions than they do now.

Both Ms Chambers and Mr Rhodes said this possibility was helping raise the price of carbon credits.

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