by John O’Brien
New government guidance on the voluntary carbon market in New Zealand is shortly coming out and it will be interesting to see if this helps the voluntary carbon market in New Zealand to grow.
The last New Zealand Ministry for Environment voluntary carbon market guidance came out in February 2022 more than four years ago and in that time a lot has changed. So the recent announcement by the Associate Minister of Environment, Andrew Hoggard, that new guidance on the voluntary carbon market is shortly coming out and will follow a twin track approach (high quality international schemes, and a new “New Zealand only” scheme is welcome news and hats off to Andrew Marshall, Ankit Kishore and others at the Ministry for Environment, but will it work?
While it is too early to say, my observation is there remains a lack of deep understanding of what it will take to make the voluntary carbon market work. In particular, demand is low and the market is small and many of the companies that do purchase Verified Emission Reductions (VERs) purchase offshore units because they are considerably cheaper or they purchase a bundle of international VERs with a smaller number of New Zealand Units (NZUs) in order to save on cost.
Very few, if any, New Zealand companies are buying international VERs at prices of NZ$50+. Many government departments and agencies do not purchase VERs at all. Transaction costs associated with setting up international voluntary carbon market projects remain very high. So two key issues that need to be addressed are lack of demand and and governance. It is all very well to state that high-trust and high-integrity principles apply but what happens when they are not applied, as has happened in the past?
Government action needs to be taken when issues of credibility and high integrity are not followed. Otherwise, problems can continue and companies may choose to drop out of the voluntary carbon market, as has also happened in the past both in New Zealand and internationally. Government should insist that all in New Zealand, all new projects follow the principles of the Integrity Council of the Voluntary Carbon Market (IC VCM) and its Core Carbon Principles (CCP) and that this shall be mandatory and not optional.
https://icvcm.org/core-carbon-principles/
Finally, the Press Release of the Government uses the words that this is like a “Warrant of Fitness”.
In my view, this is not a good analogy. If you don’t pass your warrant of fitness, you cannot legally drive your car. In the voluntary carbon market, in the past however, you could not follow the guidance of the Ministry of Environment on the voluntary carbon market, and develop a low-integrity, low-transparency, non-additional project that generated carbon credits that never should have been awarded and there have been little to no consequences.