Carbon credit prices appear to be recovering strongly after Climate Change Minister James Shaw issued a statement on Thursday that seemed intended to restore confidence in the Government’s intentions towards the Emissions Trading Scheme.
Carbon credit prices slumped to a low of about $54.40 in late March, well down on their $88.50 annual high, after the Government did not take up a recommendation made by the Climate Change Commission late last year that it should raise the minimum price at which it issues credits and tighten their supply. That prompted the failure of a carbon credit auction in March, when credits offered by the Government failed to reach their reserve price. Shaw said updated advice from the commission that the Government released on Thursday, in which the commission strongly reiterated its original advice that ETS’ settings needed to be tightened “would guide Cabinet in its decisions”.
Salt Funds Management carbon fund manager Paul Harrison forecast last week that the Government was likely to issue a statement along those lines to fix what he assessed had been a mistake in its previous messaging to the market, and said Shaw’s comments “probably would calm people’s nerves”.
Buyers were offering $60 for carbon credits on secondary markets on Thursday morning, but offers had largely dried up, with the lowest sitting at $67, he said.
Shaw said officials would now consider the commission’s latest recommendations and provide further advice to ministers.
The wobble in confidence in the carbon market had threatened to cut off a $1.3 billion income stream for the Government from the auction of carbon credits this year, that is earmarked to fund climate initiatives.
Climate Change Commission chairperson Rod Carr stated bluntly in its latest report, which the Government would have originally received in March, that current price settings for the ETS meant it “cannot function as effectively as it should”. It will also bring the ETS settings back into step with Aotearoa New Zealand’s emissions budgets and targets,” Carr said.
Credit: stuff.co.nz
