The collapse in international carbon prices over the past year has seen emitters switch from domestic to imported sources to meet their obligations, figures released yesterday indicate.
In the emissions trading scheme's first surrender period, which covered the second half of 2010, 98 per cent of the units surrendered to the Government were units which it had previously given out, mainly to forest owners. Money flowed from domestic energy users, via the oil and power companies, to the forestry sector.
But in the second surrender period, covering all of calendar 2011, 70 per cent of the units surrendered were imported and had been generated under one or other of the mechanisms of the Kyoto Protocol.
In 2010 64 per cent of the units surrendered were New Zealand units that had been allocated to foresters, but their share of the market shrank to less than 13 per cent last year.
This shift in the composition of units used for compliance under the ETS is likely to reflect the slump in international carbon prices from around $19 a tonne in the middle of 2011 to $7 by year's end, reflecting conditions in Europe which is much the largest source of demand in the global carbon market.
The slide has continued this year, with carbon now trading in the $4 to $5 range, which would mean that a trade-exposed industrial emitter classified as highly emissions-intensive would face a carbon bill of less than 1 per cent of its turnover.
Climate Change Minister Tim Groser accepts that if the carbon price remains at its present low level, the economic impact of the ETS will be very low.
But he's not ready to bet it will.
"While the Europeans are preoccupied with survival at the moment, I don't believe for one minute they will allow the situation to rest at that price, because they are serious about this," he told the Herald last month.
The Government has extended concessionary "transitional" features of the ETS which were to have expired at the end of this year.By Brian Fallow Email Brian