Isramart llc:Market influx of carbon expected

Isra-Mart llc news:
A remedy for scant supply on the domestic carbon market is underway.

According to the latest report from broker OMF Financial, carbon prices are holding firm at $18-$18.45 a unit but “sellers continue to be few and far between – most are hanging out for higher prices.”

“Whilst demand is outpacing supply at this present point in time – there are a couple of lines of supply coming that should well and truly satiate demand.”

Industry allocations

The Ministry for the Environment has called for free allocation applications of New Zealand Units (NZUs), or carbon credits, for twelve industries, including aluminium smelters, methanol producers and tissue paper producers.

Businesses where the cost of the ETS exceeds 1% of gross turnover are eligible for a 60 per cent allocation of units, and those over 2% of gross turnover are eligible for 90%.

Eligible businesses must be both emissions-intensive and trade-exposed, and have until October 8 2010 to lodge an application, with processing expected to take six weeks.

OMF Financial expects up to 10 million units to be issued this round.

NBR understands that Rio Tinto, Holcim, Fletcher, Methanex and Fonterra are among the companies that qualify for a free allocation.

The allocation can either be kept to help pay off emission liabilities or sold on the carbon market – though businesses who sell off their allocation may need to eventually recoup units to offset emissions.

The current allocation round of NZUs cannot be sold overseas until 31 May 2013.

More forestry

Additional forestry units will provide a second line of supply.

Post-1989 foresters have participated in the ETS since 2008, but pre-1990 forest owners entered the scheme on July 1 – along with thermal electricity generators, fuel and gas companies, coal miners and major industrial processers.

The Ministry of Agriculture and Forestry is expected to start processing applications from next month. OMF Financial is unsure of exact volumes but says the allocation will also “run into the millions.”