Climate Change Minister Tim Groser has announced two types of international carbon credits will be banned from the New Zealand Emissions Trading Scheme, although the benefits will only be felt two years from now.
Under the changes, Emission Reduction Units generated from industrial gas destruction projects and Certified Emission Reduction units from large-scale hydropower projects that do not meet international guidelines will be excluded from the kiwi scheme.
“Australia and the European Union have already announced their intention to restrict these units from their emissions trading schemes,” said Groser. “Banning these units now strengthens the integrity of the ETS and therefore our ability to advance discussions on linking with other major domestic emissions trading schemes.”
The announcement comes after the Government came under heavy fire earlier this year from critics who accused it of hamstringing the ETS scheme by allowing cheap carbon credits to be sold in the New Zealand market.
The additional supply dropped the price of carbon from $25 per tonne when the ETS was launched in 2007 to around $4 per tonne recently.
At that level, environmentalists say it provides little cost incentive for major polluters to change their ways, and forestry owners said the margins were too low to justify planting trees for carbon capture.
The ban is expected to only start having an impact on supply in 2015, as businesses that already own these units will be allowed to cash them in, and there is an exemption until June 2014 on units purchased under forward contracts secured before December 17.