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New Zealand Focuses on CO2 Costs, Not Climate, IdeaCarbon Says

New Zealand proposals to extend its carbon market beyond 2012 focus on cutting costs for emitters rather than protecting the climate, IdeaCarbon said.

A panel of lawmakers reviewing the market proposed to increase a price cap by NZ$5 a ton a year starting in 2013 from its current level of NZ$25 ($20.53) a ton, according to a report published today on a government website. It requested the government consider limiting use of Certified Emission Reduction credits from projects that curb hydrofluorocarbon-23 gas, the most plentiful offset type in the United Nations carbon market.

The panel’s recommendations will probably mean the price doesn't rise to threaten the price cap, said Matthew Gray, an analyst in London for IdeaCarbon, which rates emission credit projects. “It’s hard to see them hit the cap anytime soon,” he said today by e-mail.

The recommendations could boost demand for CERs from the UN program, he said. Emitters will probably “continue to favor CERs over NZ units, because they are liquid and cost effective.”

Spot New Zealand allowances, known as units, dropped 23 percent this year to NZ$15.13 a ton, according to data from Westpac Banking Corp. New supply of credits in the UN market surged to 228 million tons so far this year, compared with 132 million tons in all of last year, Bloomberg data show.

CERs for December rose 0.9 percent today to 8.80 euros ($12.15) a ton on the ICE Futures Europe Exchange in London as of 12:16 p.m. local time. Gray said he expected the panel to recommend limits on credits from hydrofluorocarbon-23-cutting projects, which the EU imposed earlier this year for May 2013.

The panel sought to “appropriately pace the increase in the scheme’s costs in the short term and to continue to protect the most exposed businesses through free allocation of New Zealand emission units,” according to the report.

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