New Zealand Government Supercharges Emissions Trading Scheme with Huge Increases in Carbon Credit Values Proposed for 2020

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.

Go to https://www.greenxperts.co.nz/mycarbonservices for more, or contact us at: info@greenxperts.co.nz.

Billion Tree Blessing

I've been a bit bemused to read media coverage lately about some parties complaining that the Billion Tree Funding Programme (1BT) and the NZ Government's changes to the Emissions Trading Scheme (NZETS) are leading to an exodus from hill country farming.  Apparently, large numbers of farms are being sold to overseas interests so that forests can be planted on them.  As a result, it is alleged, more NZ land is going into overseas investors' hands, and the local rural community and rural schools are being emptied of jobs and children.

So, I've done a quick fact check and find:

• 70% of NZ's commercial forests are already overseas owned - so sorry folks, the horse has already bolted; and,
• Yes, a few farms have been sold to overseas interests for forestry development, but the trend is no more than usual (so far).  The sales have had to go through the Overseas Investment Office (OIO) approval process, so if there is concern about how many farms are sold to overseas buyers, the place to change the policy settings is at the OIO; and,
• Growing trees on marginal hill country and other "badlands" for wood and carbon credits still provide better economic and environmental returns than any other option.

As far as I know, NZ is the only country with a Billion Tree Blessing where land owners are given (that's given, not lent) money by the Government to plant trees that can become part of an ETS, and earn carbon credits (NZU) for their owners.  Creating two revenue streams where before there may have been none, or not much, or a loss.

So what does the Billion Tree Blessing give to rural land owners and the rest of NZ?

• A gift to plant trees on land that's not producing anything except rates and fencing bills;
• Another gift in carbon credits that can be easily sold in the carbon market (with the surrender requirement gone), or kept as a valuable futures stock;
• '1BT' and 'Join ETS' application preparation fees at least partly covered by the grant, with both being tax deductible; and,
• More NZ-owned marginal country turned into forestry, increasing the percentage of commercial forests owned by New Zealanders, and starting to bring back into NZ ownership the revenue, jobs, erosion control, and climate change benefits of beautiful trees. 

The Billion Tree Blessing is a gift - why wouldn't you take it?

*Declaration of interest - yes, my family earns part of its' living from trees - we love 'em.