29 Nov 2017

New govt a factor in firming carbon prices - trader

6:38 pm on 29 November 2017

The new government's coming actions on climate change is causing a rush on carbon credits to offset greenhouse gas emissions.

The price of carbon credits has risen by $1 a tonne since Labour's coalition government came to power and is forecast to rise by another dollar to $20 by Christmas.

And the price could go far higher within the next decade.

Carbon credits are bought by companies who have no option but to emit greenhouse gases if they want to stay in business.

An oil company is one such body, since anyone burning petrol in a car will necessarily emit CO2 from the tailpipe.

Oil companies will buy carbon credits to offset these emissions.

Such credits are typically sold by companies such as forestry groups, since trees absorb CO2 as they grow.

Economic growth has traditionally pushed up the price of these credits, but carbon trader Nigel Brunel said the new government's policies was another factor.

"Since the ... election over a month ago, we have seen the price continue to push higher," Mr Brunel said.

"We are sitting at a six-year high.

"So the market is very firm."

Mr Brunel said there were ambitious targets set by the new government, including doubling the emissions reduction goals by 2050, which would increase the demand for credits.

And he said prices could go higher again than $20 a tonne.

"Under the Paris agreement they are looking to keep temperatures 1.5°C above pre-industrial levels.

"To reach that target we are looking at a much higher carbon price.

"Organisations such as the World Bank are saying that in order to reach that target, you are probably looking at carbon prices as high as $US75 to $US100 a tonne."

Get the new RNZ app

for ad-free news and current affairs