CO2 - Carbon Fund units

[Snoopy]

If government policy moves entirely towards decreasing CO2 emissions, rather than mitigating their effect, what does that do to the CO2 unit price?

That's exactly the point of a cap on emissions. The cap sets the supply limit, demand sets the price, the price drives the emission reductions

First of all thanks for your answers. I have learned something. I do have a problem with that last answer though.

'Emissions reductions' occur when current energy use practices are realigned in such a way that carbon output is reduced. Carrying on as we are and trying to offset that by planting trees is not sustainable. Planting trees is a necessary short to medium term measure to capture some of that excess CO2 that already exists. I grant you that. But ultimately you can't 'carbon farm' your way out of climate change. It is the day to day operational processes that industry and consumers follow that must change for that.

Hence we have government schemes that subsidise the purchase of new electric cars, as an example. And other schemes that see the likes of some coal fired boilers replaced with electrically powered boilers. Those are the schemes that will actually reduce emissions for NZ on a sustainable basis. I see the government doing more of that, rather than persisting with carbon credits as an indirect incentive. Where to for the carbon market then?

SNOOPY

[jonu]

First of all thanks for your answers. I have learned something. I do have a problem with that last answer though.

'Emissions reductions' occur when current energy use practices are realigned in such a way that carbon output is reduced. Carrying on as we are and trying to offset that by planting trees is not sustainable. Planting trees is a necessary short to medium term measure to capture some of that excess CO2 that already exists. I grant you that. But ultimately you can't 'carbon farm' your way out of climate change. It is the day to day operational processes that industry and consumers follow that must change for that.

Hence we have government schemes that subsidise the purchase of new electric cars, as an example. And other schemes that see the likes of some coal fired boilers replaced with electrically powered boilers. Those are the schemes that will actually reduce emissions for NZ on a sustainable basis. I see the government doing more of that, rather than persisting with carbon credits as an indirect incentive. Where to for the carbon market then?

SNOOPY

The whole carbon market and emissions measurement system is a giant ticket clipping scam. There are so many inconsistent standards and glaring omissions in the way they measure things.

1. The government won't recognise native or natural regenerating bush/scrub. Has to be planted. (I have sympathy for Maori landowners in this regard)

2. Farmers are having to fight to get shelter belts and bush filled gullies recognised, presumably because it is deemed to be too small on a farm by farm basis, but actually adds up to thousands of acres across the country.

3. Grass growth on farms isn't taken into account, but the methane produced by eating that grass is. Many farms would be neutral or close to it if this was taken into account. It's extraordinary that they measure the output without allowing for the input. It is a carbon cycle after all.

4. Wetlands. Wetlands have high ecological value but are also high emitters of methane. Hence the fears of the Siberian tundra permafrost melting. Yet we hear endless pleas for more wetlands without anyone bothering to calculate the methane ouput.

[Ricky-bobby]

There is a perception that the whole carbon offsetting is green washing… we as a business have moved away from it and instead of buying credits we now take that $$ saved and put it into initiatives that actually make a difference. Upgrading machinery etc. I can see other businesses will do the same, thus why I exited my salt shares…

[haewai]

Hence we have government schemes that subsidise the purchase of new electric cars, as an example. And other schemes that see the likes of some coal fired boilers replaced with electrically powered boilers. Those are the schemes that will actually reduce emissions for NZ on a sustainable basis. I see the government doing more of that, rather than persisting with carbon credits as an indirect incentive. Where to for the carbon market then?

Every effort and option is needed.
And markets are imperfect. There are failures and barriers and differing elasticities. Emissions costs are important to electrciity generation investment, but not to car buyers. Investing in new technology is risky. etc etc

[Snoopy]

Article here on today's events:
https://www.newsroom.co.nz/sustainab...ons-legitimacy

"Last year, the commission provided its first batch of advice on the Emissions Trading Scheme (ETS), required each year under the Zero Carbon Act, proposing major changes."

"These would curtail the number of units auctioned into the scheme in an effort to draw down a stockpile of units already held by polluters, which were obtained when the price of carbon was low. They would also increase the floor on the carbon price substantially and drastically increase a soft price ceiling, to better allow the market to find the right price to cut emissions."

The above was what was 'back-flipped' on today. So the 'go' button has now been placed on the formerly 'curtailed' plan.

I guess once carbon credits are created, they remain in the system. But why would polluters want to 'draw down their stock' of carbon units? Surely they could only do this if they could simultaneously change their production processes so they are not emitting so much CO2, and they therefore don't need the credits any more?

I guess the higher the carbon price, the greater the incentive to sell and spend the money you get on decarbonising your production processes?

There is a perception that the whole carbon offsetting is green washing… we as a business have moved away from it and instead of buying credits we now take that $$ saved and put it into initiatives that actually make a difference. Upgrading machinery etc. I can see other businesses will do the same, thus why I exited my salt shares…

Is the above effectively what you are doing Ricky-bobby?

SNOOPY

[Ricky-bobby]

Yep we changed to a carbon reducing standard. We are also planting trees etc, but this takes time and $$. the off-setts will take time to come online. Some companies will stick with carbon zero, but many won’t specially at the moment with the cost of business blowing out. It’s a nice to have.

[Sideshow Bob]

Quarterly Update

http://nzx-prod-s7fsd7f98s.s3-websit...524/399412.pdf

[clip]

Carbon Match


Q3 Auction Results
The third NZU auction for the year took place at midday today - and was "declined" again for the third time this year.


No volume had been sold at the previous two auctions, meaning that in addition to today's scheduled volume of 4.475 million, there was volume carried over from the first two auctions, taking the total available to 13.425 million.


A floor price of $33.06 applied, and a further 8 million units were available at a trigger price of $80.64. As usual, a Confidential Reserve Price (the "CRP") also applied.


For the Government to have sold volume at today’s auction, either (A) all 13.425 million units were required to be bid for at or above the CRP, or (B) a portion of the 13.425 million could be sold, subject to all buying interest turning up at a level at, or above, the CRP.


Neither of those scenarios bore out today, and we note that total volume bid for was just 7.674 million.


This auction was the final auction for the calendar year under the ‘old’ price control settings. Amendments to these were announced in July following the High Court decision ordering the Climate Change Minister to reconsider the ETS settings for 2023-2027.


In contrast to today's auction parameters, December auction will take place with new settings as follows:


Image
Carbon Match’s lowest priced trade for the year was at $38 in early July, and spot NZUs have in general been gaining ground ever since - with a last trade price of $70 at market opening this morning.


With today's Cost Containment Reserve ("CCR") trigger price ($80.64) some $10 above current secondary market pricing, the 8m extra CCR volume was not expected to be released this auction.


However, had all the primary scheduled volume bee sold today, at, for example, yesterday's closing price of $70, the Government would have received some $940 million.


Not all is lost. While new regulations are yet to be published, it is understood from the MfE website that the amended volumes (a downwards adjustment of 1.9 million from previous NZUs available by auction for 2023) will mean that the December auction will offer 15 million units (excluding the 8 million CCR). That could equate to a cash injection for an incoming Government of more than $1 billion assuming a similar price level.


There are variety of scenarios for the December auction - we will report back on this closer to the time. As of writing this (12.33pm) last trade for NZUs was $71.50. The situation is fluid so do log in and check out the board.


EPA Reports Available
On a separate note, the EPA’s annual ETS Participant Emissions Report was released yesterday. This details a summarised list of the ETS participants and their related reported emissions (tCO2e). Total reported emissions were down from the last two years, decreasing from 71 million to 67 million this year.


Total reported removals were up from around 8 million in the last two years, to 22.5 million this year - in part due to this year being the end of the five year MERP for forestry owners.


The corresponding surrenders presented in the EPA’s Unit Movement Report are not as expected, and we aware that many participants have been querying the discrepancy. In previous recent annual periods, total net surrenders were around 38-40 million. However the statistics for the most recent year showed total net surrender volume of just 25 million.


The EPA has now noted that this variance is due to the fact that the EPA proposes to amend certain emitters’ returns under the CCRA for this reporting period, thus the original surrender obligations are suspended until the relevant emissions return(s) have been satisfactorily corrected.

[Sideshow Bob]

Trading about 10% under NTA.

Since the 1st of October, they've bought back around 3% of the units as treasury stock (43m on issue), and announcements have said they've only issued about 4,500.

Must be a good game buying yourself at a 10% discount....

[nztx]

No James & No Robbo around to bicycle pump things up or down ; or survey large expanses of
little CO2 interest, Auctions going south like a lead balloon etc etc

and all the resident Mooloos out back soon get to pump out as much rich BS as they like to their hearts content
free of the Clingon's bales of red & green restraining tape

Merry Christmas - Muriel, Edna & Trev