New Zealand Carbon Farming, the country's largest supplier of post-1989 bulk carbon credits, is suing Mighty River Power for $34.7 million over liability for carbon credits the listed energy company was contracted to buy as part of its efforts to offset carbon emissions from electricity generation.
The case, currently under way in the High Court at Auckland, centres on a change to the methodology for working out the amount of carbon credits produced by forests under the Emissions Trading Scheme.
New Zealand Carbon Farming's (NZCF) legal claim relates to a contract dispute with Mighty River Power (MRP) over carbon credits under a 15-year contract for NZCF's Harwarden Forest in North Canterbury.
MRP is contesting the claim which would mean it would have to buy significantly more carbon units from the supplier than was originally forecast because the contract included a pro-rata scale up or down clause if the amount of carbon sinks produced by the forest was altered under new methodology.
MRP's annual report in its notes to the financial accounts said only that it was involved in a contract dispute over asset purchases which was currently before the courts and had a potential cost of up to $6.4 million. But the court was told on Monday the number of carbon credits MRP was required to take using the new methodology had a significant financial impact, potentially near doubling the cost of the 15-year contract from $36.6 million to $71.27 million - a difference of $34.67 million.
Justice Kit Toogood agreed to an MRP request for the price per unit under the contract to be kept confidential.
NZCF is one of about 10 firms that MRP buys forestry-based carbon credits from to cover the company's emissions obligations under the ETS. The company's stations produce 400-500kt of carbon dioxide which works out to an annual carbon credit obligation of 200,000-250,000 credits.