I’ve seen the future and it is... New Zealand

If we followed the advice of the big polluters in Australia we would end up without a floor price and a carbon market that looked eerily similar to that of New Zealand.

The Department of Climate Change and Energy Efficiency has publicly released the submissions on its proposal for implementation of a floor on the carbon price.

As you would expect the industry associations representing large polluters – The Business Council of Australia, the Australian Industry Greenhouse Network, the Australian Petroleum Production and Exploration Association, and the Energy Supply Association of Australia – all continue to oppose the idea of paying a minimum price for the pollution their member companies emit.

If we followed their advice the Australian carbon price would look a lot like the chart below, prepared by Deutsche Bank analyst, Tim Jordan. This graphs the carbon price under the New Zealand Emissions Trading Scheme in New Zealand dollars per tonne of CO2.

You will notice that when the scheme began in April 2011, the price of New Zealand Carbon Permits (NZU) was slightly below the price of international credits (CERs). But once the CER price dropped, it pretty much set the carbon price for the New Zealand Scheme.

This is because the New Zealand government, just like the Australian government, will recognise a CER as a perfect substitute to an NZU for compliance purposes. In Australian dollar terms, the current price equates to about $4.80 per tonne of CO2.

Price of New Zealand carbon emission permits relative to international CER credits

Source: Tim Jordan, Deutsche Bank

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