Maori group accuses New Zealand government of 'fundamentally flawed' approach to carbon trading scheme as unit value drops below historic NZ$3 low, claims value of units issued to Maori forest owners has dropped to NZ$90M from NZ$600M
DUNEDIN, New Zealand
October 19, 2012
– The peak Maori body advising the government on climate change issues says the weak provisions intended for the Emissions Trading Scheme are robbing Maori of hundreds of millions of dollars by depressing the value of New Zealand carbon credits attached to Maori forestry holdings.
The comments coincide with the value of a New Zealand Unit (NZU) dropping back below NZ$3, a historic low point, for the second time in a month, as a glut of European carbon credits combines with New Zealand's policy to allow local greenhouse gas emissions to be offset by unlimited foreign-sourced carbon credits.
The Climate Change (Emissions Trading and Other Matters) Amendment Bill is due to be reported back to Parliament by the finance and expenditure select committee mid-week, with chairman Todd McClay telling BusinessDesk not to expect significant changes to key policy decisions.
The European Union's ETS remains mired in over-supply of credits, which has seen carbon prices plummet and go lower this week with the release of a new tranche of Ukrainian forest-based credits. The lowest quality European credits, known as Emissions Reduction Units or ERUs, were trading below NZ$2 per tonne on Tuesday, with a buy price quoted by Westpac of $1.85 per tonne.
In an open letter to Climate Change Minister Tim Groser, the climate change iwi leaders group chair, Apirana Mahuika, accused the government of a "fundamentally flawed" approach which was undermining both the value of NZU's and the durability of Treaty of Waitangi settlements involving forests.
When the scheme came into existence in 2010, it was assumed carbon prices would quickly go higher than $25 a tonne, but they have instead sunk ever lower, partly because of slow global growth and because of the European market oversupply.
That, in turn, is hitting the value of credits attached to plantation forests, with Maori-owned forests accounting for 30 percent of all credits on issue, making Maori the largest single holder of NZU's. At the current value of NZ$3, the 30 million NZU's already issued to Maori forest owners is valued at NZ$90 million, compared with NZ$600 million if the carbon price for NZU's were NZ$20, still NZ$5 below the current price cap.
"Based on this analysis of current NZU holdings, the ETS policy proposed in the bill (with no import cap) will cost iwi interests between NZ$210 million and NZ$510 million, but the impact will materially worsen for iwi/Maori where the cost to iwi assets will rise to between NZ$294 million and NZ$714 million," says Mahuika in the letter, which was widely copied to Opposition politicians and key Maori bodies, although not including the New Zealand Maori Council.