The NZ ETS Review discussion document has finally been released and it signals a more positive future for carbon forestry going forward. While Agriculture has been left off the table again, the 50% subsidy on polluters surrender obligations is targeted as a priority issue.

The paper estimates that 140 million surplus NZUs have been banked and the Government acknowledges that oversupply has led to price volatility, undermining of emissions reductions, and presents fiscal risk to future Governments. Removal of the '2 for 1' emission subsidy would double the annual ETS demand from around 20m to 40m and go a long way in soaking up excess banked units. The document indicates full surrender obligations could be implemented before the end of 2016.

Submissions on priority issues close 19 February 2016.

Other review issues relating to the future direction of the NZ ETS are on a slower track. Issues flagged for consideration include managing price stability, the use of international units, and auctioning of NZUs by Government. All of these issues have the potential to undermine effective carbon pricing and are a major concern. However, the paper recognises this, and lists options such as implementing price floors, limiting the use of overseas units, and delaying auctioning until the medium to long term once banked NZUs have diminished.

Submissions on other issues close 30 April 2016.

To read the ETS Discussion Document and/or make a submission click here.

While the ETS Review discussion on forestry is limited in scope it appears more significant proposals will be released over the next 12 months.

Associate Minister for Primary Industries Jo Goodhew released a press statement yesterday to coincide with the ETS review outlining some of these changes such as:

• accounting methodologies for post-1989 foresters, including averaging, harvested wood products, and emissions from adverse events;
• the exemption provisions for tree weeds for pre-1990 forests;
• the transfer of participation for post-1989 forestry; and
• the penalty and prosecution regime.
  

Both averaging and harvested wood products could have a significant impact on the attractiveness of carbon forestry by reducing the amount of carbon liability to be repaid upon harvest and reducing perceived risk.

The Press Release can be read here.

Climate Change Minister Tim Grosser appears on TVNZ Q&A program to discuss the 'New Zealand Proposal' he is taking to the UN climate conference in Paris. He also confirms the ETS review consultation document will be released this week.

Watch the Q&A program here.

The Environmental Protection Authority (EPA) has confirmed that AAUs will be cancelled at some point in 2016, and that holders of NZ AAUs will receive replacement NZUs at a rate of one NZU for every one NZ AAU after the cancellation.

The EPA has also confirmed that NZUs replacing AAUs from Permanent Forest Sink Initiative forests will be marked as PFSI NZUs in the NZ EUR registry.

Read more at the EPA website here.