Yesterday the New Zealand Government released its proposals for reforming the price settings on the NZ Emissions Trading Scheme in 2020.
Major changes to pricing levels are proposed, see Figure 3 above.
These price control changes will act to "supercharge" the NZETS, as the price ceiling will be set at $50, the Government fixed price option will go to $35, and there will be a price floor of $20.
This potentially increases carbon credit values by 140%-200%.
There will also be a price effect on rural forestry land values - we are working on what this increase might be with associates in the rural property sector.
Consultation closes on 28 February 2020, with legislation changes proposed in mid 2020.
This morning the NZ carbon market has reacted by not trading NZU futures contracts.
We will be separately contacting our clients to advise on how the market is reacting, and how much more we calculate their carbon portfolio may be worth in 2020.
Good news for those foresters with trees in the ground registered in the NZETS! More needed!
We are very pleased that our advice on future NZETS structures and price trends has proved accurate (!).
We are now analysing other parts of Government NZETS and Zero Carbon Bill announcements, and we will be incorporating the proposed changes in our MyCarbon computer model of yields, risks and revenues from the carbon business.