New Zealand Carbon Exchange Emissions Trading and Climate Change Update

23 August 2007

In this issue:

> Carbon Market Prices and NZCX available allowances

> Voluntary Carbon Standard Framework

> Projects to Reduce Emissions Update

> Permanent Forest Sinks Initiative

> Non-PFSI Forest Carbon Credits

> Recent Conference Presentation

NZCX Limited

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New Zealand

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Tel. +64 4 473 3126
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info@nzcx.com
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Welcome to the latest New Zealand Carbon Exchange newsletter update. Read on as we summarise key news in the Emissions Trading Markets.

Carbon Market Prices and NZCX available allowances

Clean Development Mechanism and Joint Implementation Projects

We continue to see term sheets in the Primary CER market, with prices varying as per project technology, financing, project risks, jurisdiction and delivery terms. These various factors mean that we are seeing a price range of €5-€15. The JI (ERU) market remains in the CER shadow, due to smaller numbers of JI projects and corresponding allowances.

The Secondary CER market is currently trading at a discount of €~4.50 or 75-80% of European Union Greenhouse Gas Emissions Trading Scheme prices for the Phase 2 period - 2008-2012.

EUAs

Our updated website now provides details on daily European Union Allowance pricing in the European Union Greenhouse Gas Emissions Trading Scheme.

VERs

We are seeing a steady flow of projects on the supply side with lower levels of demand, however sellers are tending to hold out for price. The slow demand is due to most companies 'dipping a toe in the water' regarding carbon neutrality, as opposed to wholesale offsetting. Therefore corporate offset buyers are very particular on the types of projects, standards adhered to, verification and retirement processes. NZCX and CantorCO2e deal through Climate Warehouse, which only transacts internationally recognised verifiable standards with a full audit trail for retirement.

Allowance Term Sheets

Please contact NZCX if you have an interest in transacting VERs and CERs, as we have a good deal flow of term sheets.

Voluntary Carbon Standard Framework
The International Emissions Trading Association (IETA), The Climate Group, the World Business Council for Sustainable Development and the World Economic Forum recently announced the release of the Voluntary Carbon Standard (VCS) Framework. The VCS is a global standard that will seek to provide quality assurance to the voluntary carbon trading market. This global standard will apply to projects across all jurisdictions and is based on units being: real measurable permanent additional independently verified not double-counted Independent and accredited VCS registries will also be established, so that emissions units can be tracked, traded with other market participants, and retired when appropriate. To read the full IETA press release, please click here.

Projects to Reduce Emissions - Joint Implementation Process


New Zealand's Ministry for the Environment (MfE) has released documentation to participants who gained carbon credits under the Government's Projects to Reduce Emissions (PRE) programme. PRE participants are now able to apply to MfE to have their project approved as a Joint Implementation (JI) project in New Zealand. This means that Kyoto compliant, tradable ERUs can be obtained.

Permanent Forest Sinks Initiative and Forestry Credits

What is the PFSI?

The Ministry of Agriculture and Forestry (MAF) is presently revising policy on the Permanent Forest Sinks Initiative (PFSI). The PFSI is a scheme designed to encourage reforestation of 'permanent forests' in New Zealand on previously unforested land. Once eligibility criteria have been met, registering under the PFSI requires a contract between the Crown and landowner, and for that contract to be registered against the land title.

All details on the PFSI, including criteria for entry into the scheme, the types of carbon credits to be awarded by the Government, and forest harvesting possibilities can be obtained from the MAF website.

NZCX would be happy to discuss your brokerage needs at such time as the PFSI policy is finalised, and any carbon credits from the scheme are realised.

Non-PFSI Forest Carbon Credits
Currently the New Zealand Government is retaining all carbon sink credits for new forests, as well as the liability for deforestation. Given the current policy uncertainty, and prior to any further Government policy announcements, NZCX is not currently involved in brokering other types of non-PFSI forestry credits that have been sourced in New Zealand. We are looking forward to new Government policy in respect of forestry initiatives, and will update our website when policy is released.
For further forestry information please click here.

Climate Change and Energy Emissions Management Forum
NZCX recently presented at the 2nd Annual Climate Change and Energy Emissions Management Forum in Wellington. It was great to see so many key industry players at our stand. Our presentation focused on how voluntary offsetting may transition to a regulated emissions trading scheme, the development of emissions trading capabilities in the EU ETS, and how emissions trading markets evolve - with over-the-counter trading still predominating. Please click here to view a PDF copy of our presentation slides.
For any carbon trading or brokerage needs contact us - we can explain what credits we currently have access to on the international market. Want to know more about us? Visit us here

Best Regards, The NZCX Team

This newsletter has been prepared by NZCX. It is intended to provide general information in summary form. The contents do not constitute legal or professional advice and should not be relied on as such. Accordingly, specialist legal or professional brokerage and policy advice should be sought before applying the information to particular circumstances.