$190m paid, carbon market still shaky

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

The Government will be pleased that it has been able to make some sales in its first carbon auction of the year, but serious issues remain with this method of paying for New Zealand’s climate change requirements under the current structure.

Rights to emit nearly 3 million tonnes of greenhouse gas were sold for $190 million, which the Government has previously said would help to pay for its promised tax cuts.

However, not all the units on offer were sold. A tonne of climate pollution was trading at $64.50 before the auction, and these units sold for $64 — the legal minimum they can be sold at.

All four of last year’s auctions failed and the market has been described as shaky by commentators.

Big polluters can use the market to buy enough to cover their emissions. But the problem is that many of these big polluters have a sufficient number of credits already.

For example, Genesis Energy needed fewer units last year because of a wet year which meant it could use more hydro power and burn less coal.

Contact’s chief financial officer said last month that the carbon price needed to rise to around $130 to make it worthwhile for companies to switch to clean energy without the corporate welfare grants the new government says it will abolish.

The Climate Change Commission has called on the Government to sell radically fewer units in future.

But forestry companies have the right to sell unlimited units at relatively low prices, covering less than half the country’s emissions because agriculture is exempt and some big exporters were issued most of their units at no charge.

Labour announced a major review of this shortly before the election but the new National-led Government has cancelled that review.

National and Act’s coalition agreement promised to bring in different restrictions for forestry, limiting the classes of land that can be used for carbon forestry. A statement said the Government was awaiting advice this week on options, including the possibility of new legislation.

To say this is important to this district is a massive understatement.

The issue of farms being sold for carbon forestry has been ongoing for years. And although not directly related to carbon prices, the fact that forestry debris played a huge part in the damage from the two cyclones last year is another hot issue.

Future land use has been the subject of continuing debate, including in articles and commentary this week.

Gisborne District Council will complete a detailed assessment of the whole region next month that will hopefully play a major part in deciding what the future land use should be. It is eagerly awaited.