News Releases

Price of carbon gets higher by the day

4 June 2008

Catherine Beard, executive director of the Greenhouse Policy Coalition, says the price of carbon in the EU ETS has hit NZ$50/tonne (€27.13) for EUA’s and NZ $35/tonne (€19.00) for Dec 08 CER’s, which are the units most New Zealand businesses will have to buy if the Emissions Trading Bill before the Finance and Expenditure Select Committee goes ahead in its current form.

“These sorts of prices are going to be a huge challenge for NZ businesses to absorb and maintain profitability and it is highly likely that many will fail if there is no price safety limit in the emissions trading system or better protection for trade exposed industry.”

“When the Minister was assuring New Zealand that the impact of the emissions trading legislation would be “miniscule” – he was basing his comments on the impact of $15/tonne carbon.”

“Carbon analysts are predicting that the EUA price will reach €40 (NZ$75.00) this year (Deutsche Bank raises 2008 EUA forecast to 40 euros) and the CER price tends to follow the EUA lead, albeit at a slightly lower rate. Analysts say these prices will be driven by higher than expected emissions in Europe in 2007, rising oil prices and the inclusion of aviation carbon emissions in the EU scheme from 2011 or 2012.”

“Demand for CERs is keeping the price in an upwards direction, due to the continued uncertainty of the future of the market, a tightening of regulations at the United Nations and a shortage of skilled workers to perform validation and verification services, according to market analysts.”

Catherine Beard says it seems that the US is unlikely to expose its whole economy to a price of carbon set by Europe, if the first comprehensive climate change bill to reach the Senate floor of the White House is anything to go by.

“The Lieberman-Warner Climate Security Act includes ‘cost containment’ provisions that should keep the US allowance price below the US$22-30 range. At around €17.90 (US$27.40) CER prices are already close to the upper bound and expected to rise further. (IDEAcarbon Weekly Commentary: For Lieberman-Warner, CERs likely won’t be the answer).”

Analysts say US compliance buyers will therefore find it cheaper to buy international voluntary offsets (at a cost of US$5-10), not to mention buying domestic voluntary offsets or participating in cost-containment auctions.

Catherine Beard said it should be noted that even in Europe less than half its emissions are controlled by the emissions trading scheme and for a country like Ireland, only a third of its emissions fall under the ETS.

“New Zealand seems alone in the world in its determination to put a price on every tonne of emissions at the highest possible price and unless we get some significant changes to the emissions trading Bill we risk losing industry to developing countries where there will be no price on carbon and lower levels of efficiency.”

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