Australia's CO2 Group seeks growth in New Zealand

Posted on 14 June 2010

Australian environmental services company CO2 Group Ltd has moved to capture a share of New Zealand's new carbon emissions market, taking the view that growth prospects across the Tasman Sea are far better than in Australia.


The firm said on Friday it has formed a partnership with Maori development company Tukia Group, and New Zealand investment and advisory firm Carbon & Energy Partners to develop sustainable carbon forests on behalf of third-party investors.


Carbon credits generated from the forests will be able to sold into the $143 billion international carbon market, allowed for under New Zealand's emission trading scheme (ETS), which ramps on July 1 with the inclusion of emissions from power stations, refineries, transport and steel makers.


'The key attraction in New Zealand is that you can access international markets while, in Australia, the approach that the government has taken has left no opportunity for export,' said CO2 chief executive Andrew Grant.


'There's scope in New Zealand to literally do hundreds of thousands of hectares of plantings and be a significant global player in the supply of carbon (offsets) to the global market,' he told Reuters.


The Australian government in April delayed an emissions trading scheme until at least 2013 after a political backlash, upsetting many firms that were planning to trade carbon permits or offer greenhouse gas reduction services.


Without an ETS, firms in Australia looked for growth in the voluntary carbon market but the government's decision to launch a new national carbon offset scheme threatens to stymie this market as many say the new scheme is too narrow.




The government plans to replace the Greenhouse Friendly program under which providers of carbon offsets flourished, with a National Carbon Offset Standard from July 1. [ID:nSGE65906W]


'They're casting us adrift from Greenhouse Friendly without giving us a fully conceived alternative,' said Grant.


He said growth prospects in New Zealand were better than near-term growth opportunities in Australia where the government was still struggling with its carbon policies.


CO2 Group's New Zealand partnership CO2 NZ, in which the firm will hold a 45 percent interest, will access undeveloped land owned by Tukia Group in the central North Island to grow forests that will produce carbon credits.


Tukia will provide CO2 NZ with around 5 million tradeable New Zealand emission units by the end of 2010 from 176,000 hectares (440,000 acres) of established forests that its manages as well as provide the partnership with access to undeveloped land.


Present trade in New Zealand emissions units, or NZUs, is very thin, with prices around NZ$18 ($12.30) per unit, well below the scheme's initial price cap of NZ$25 each. Each NZU represents a tonne of carbon dioxide-equivalent.


But trade in NZUs is expected to pick up over the next year as big polluting firms meet their carbon cost obligations under the trading scheme.


Forestry will be a significant source of NZUs because trees soak up large amounts of carbon dioxide as they grow, earning plantation owners offsets that they can sell to greenhouse gas polluters.


NZUs can also be converted into sovereign Assigned Amount Units, or AAUs, under the U.N.'s Kyoto Protocol.


AAUs can be sold to other governments that need to meet mandatory emissions targets but the trade in these units is not transparent.


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