As Labour tries to get enough support from the smaller political parties to introduce the most comprehensive emissions trading scheme in the world, the international price of carbon continues to be very volatile and ever increasing, ranging from a low of NZ$28/t to a high of around NZ$45/t CO2e over the past 6 months.
On top of the volatility driven recently by oil and gas prices in Europe, carbon analysts of major European banks see the price converging on NZ$100 by 2012.
Catherine Beard, executive director of the Greenhouse Policy Coalition says if the emissions trading Bill gets passed in its current form, the New Zealand economy will be on a rollercoaster ride, with every business and household facing a new set of volatile energy costs over which they have little control.
“If the Bill before Parliament gets the support of enough parties to be passed into law, New Zealand will be at the mercy of the European carbon market, which is the highest priced carbon in the world and where the price is increasingly set by the price of oil and gas”.
Catherine Beard says it is hard to imagine any other country would be so willing to risk energy poverty in their economy by exposing all their country emissions to the highest price of carbon in the world.
“Australia is considering reducing the risk by having one way trading and capping the price of carbon.”
“The European Union scheme only covers around 40% of emissions, so a large part of the EU economy does not face the price of carbon and generous allocation of allowances to industry has shielded them from most of the impact of the charges through to 2013.”
“Carbon analysts predict if the US sets up a national cap and trade scheme they will not want to see a wealth transfer outside of the US – so they will have a domestic scheme which allows low cost off-sets (tree planting etc from voluntary markets) to keep their carbon price at a reasonable level.”
Catherine Beard says more work is required on the emissions trading Bill to ensure New Zealand does not end up trading at the expensive end of the market.
“The government promoted this Bill on the basis of a carbon price of $15/tonne. The UN credits that New Zealand companies will most likely have to buy are currently trading at around NZ$40/tonne and the analysts predict the gap between these units and the EU units (currently NZ$46/tonne with forecast values as high as NZ$100/tonne) will continue to narrow as the UN trading registry gets established in the next few months, meaning we will be paying dearly for our emissions.”