New Zealand has been tipped to quit the Kyoto Protocol, designed to cut global emissions.
Government officials next month travel to Doha in Qatar for the latest round of negotiations on the treaty, but with less than four weeks before the summit, acting Climate Change Minister Simon Bridges says the Government has "not made a decision" on its commitment.
"My understanding is that decisions have yet to be made on that matter," he said.
But the actions of participants in the carbon market, and market signs, suggest the Government is preparing to walk away. It will soon pass legislation that critics claim will weaken an already ineffectual emissions trading scheme, the mechanism designed to put a price on carbon and encourage a transition to a lower-carbon economy.
Market watchers say changes to the scheme do not look like preparation for the Government agreeing to new emissions reduction commitments that would kick in from the end of the year. They say low activity on the carbon market, despite bargain prices, are evidence carbon emitting businesses think the same.
Last week carbon prices dropped to about $1 a tonne for some types of credits, but the market was quiet, with emitters resisting the temptation to stockpile cheap credits for the future.
"I'm surprised people are not filling their boots," one market participant said. "People seem to be having a tough time believing the market is credible."
There is growing speculation the Government's silence is because it could save face internationally by waiting for big players like China and the US to refuse to sign up to the second Kyoto round, before following suit.
But OM Financial carbon broker Nigel Brunnel thinks New Zealand will sign up to new commitments in Doha, but then delay ratifying them. That could buy time to pursue aligning with a group of Asia-Pacific partners, and adopting voluntary emissions targets outside of Kyoto.
That fits into two of the Government's climate-change themes, New Zealand doing its share, and not damaging competitiveness by enforcing heavy carbon payments on businesses when trading partners like the US and China do not.
Because of that, about 85 per cent of world carbon emissions are not covered by international reduction agreements, and it is said in government circles that China's emissions increase daily by New Zealand's entire annual carbon output.
Brunnel said companies with obligations to surrender credits had seen their value collapse, and he believed such businesses had lost faith in the market. Trading for some overseas-issued credits might also be slow because of talk New Zealand might not sign a new Kyoto deal, creating fears credit holders might not be able to surrender them under our ETS.
The Sustainability Council's Simon Terry said he did not expect New Zealand to accept a second set of Kyoto commitments in Doha, and he would not go himself because he could not justify the emissions produced to get there.
The Green Party last week tried to force the Government's hand, arguing New Zealand should show leadership.
But Federated Farmers president Bruce Wills called the Kyoto Protocol "somewhat flawed", given some of the world's biggest greenhouse gas emitters weren't involved. He said nothing would change for the farming community should the Government end its involvement.
He said emissions and global warming were major issues. "But we weren't convinced the Kyoto Protocol was the most sensible approach."
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