A quick update for forest owners of registered post-89 forest, as it relates to the NZ Emissions Trading Scheme.
Post 1989 Mandatory Return Entitlement
By now you would have received your carbon credit entitlement for the 2008-2012 period (five years) claimed under the recent Mandatory Emissions Return. These units (NZUs) have been transferred into your holding account from the Crown. If you are a Primary Representative on your holding account you would have received an email regarding this transfer. These units will remain in your holding account until you chose to sell the, use them to meet a harvest liability or exit the ETS.
Current Pricing July 2013
Prices for NZUs have fluctuated up and down between $1.75 and $2.25 from mid-June to current price. A cheaper imported unit called an ERU, which can be used for surrender purposes (by all emitters including Pre 1990 deforestation and Post 1989 deregistration’s) until 2015. This unit has fluctuated from $0.25 mid-June to $0.48 current price.
What Happens Now?
No actions are required until the next the next mandatory return, which is due in 2018, unless:
If you have, or are intending to harvest (or suffered from fire or windthrow) any area of forest registered in the ETS.
You wish to sell your NZUs, or
You wish to withdraw all or some forest from the ETS.
Harvesting Areas Registered in the ETS
If you have or are intending to harvest any area of forest registered in the ETS or suffered from fire or windthrow please contact Interpine. Such removal of forest will require the NZUs earned by that piece of forest to be surrendered to the Crown as part of the next mandatory emissions return process.
Withdrawing from the ETS
As a participant in the ETS and claiming NZU credits for growth from 1 January 2008, there is an on-going liability to surrender units when the trees are harvested. For forest planted before 1998 that amounts to the same volume of units earned. Given its impossible to predict the carbon price in 10-15 years’ time this liability is difficult to quantify. Combined with the current low price of NZUs makes it unattractive to sell any NZUs for cash flow, risking having to surrender an NZU worth $10, $20 or more at harvest; totally defeating the purpose of being in the ETS.
The upside is, essentially the current rules give forest owners the opportunity to remove this future harvesting liability by exiting the ETS at minimal administration costs and surrendering the cheap international units to zero you emissions account. The NZUs you have could either be retained awaiting the inevitable lift in value expected after mid-2015 or pocket the difference between the NZU and the ERU price now. Once exited from the scheme you are free to harvest and replant – or not – as and when you want, without encumbering your land any longer.
When the cheaper units are no longer available, the New Zealand emitters will rely on NZUs to meet their surrender liabilities. The law of supply and demand suggests this will drive up the price. Its worthy to note that foresters can re-join the scheme at any time in the future with their Post 1989 forest having previous cancelled liabilities and therefore eligible to earn NZUs going forward.
If you are interested in finding out more about exiting the scheme or looking at harvesting some of your Post 1989 trees please contact Interpine or contact the Ministry of Primary Industries (MPI), formally MAF on www.mpi.govt.nz, 0800 254 628 (Option 3), or email at email@example.com.