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Susan Kilsby: ANZ agricultural economist on the latest carbon auction failing · Best of Business

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  Speaker 1: duple c Allen.
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  Speaker 2: Get another carbon auction has failed. There are serious questions
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  Speaker 2: now over whether our carbon market is actually working or not.
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  Speaker 2: Just over four million units were available to buy today
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  Speaker 2: at sixty four dollars each, but they're costing just forty
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  Speaker 2: nine bucks on the secondary market, so no surprise, none
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  Speaker 2: was sold at the auction. Susan Kilsby is an agricultural
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  Speaker 2: economist today and zenen with us. Now Hey, Susan, Hello,
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  Speaker 2: Is this a case of just pricing them too high?
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  Speaker 2: Or is it a case of people now being quite
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  Speaker 2: nervous about the direction of the climate policy.
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  Speaker 3: Well, it really comes down to the fact that there's
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  Speaker 3: a lot of units in circulation at the moment, so
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  Speaker 3: more than the market really needs. So people don't need
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  Speaker 3: to go to these government auctions to buy their units
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  Speaker 3: at sixty four dollars when they can buy them elsewhere
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  Speaker 3: at forty nine dollars. So essentially it's just the market
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  Speaker 3: working as it should when there's an oversupply situation where
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  Speaker 3: it's that you're reducing the supplied by these units not
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  Speaker 3: entering the market.
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  Speaker 2: Is it not the case? Also, Susan that the ones
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  Speaker 2: that were unsold in this auction transfer over to the
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  Speaker 2: next auction.
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  Speaker 3: Yeah, that's that's correct. So anything's unsold during the calendar
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  Speaker 3: year gets transferred through through to the end of the year.
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  Speaker 3: As we saw what happened last year, which we had
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  Speaker 3: a lot of options that didn't sell, the same.
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  Speaker 2: Thing is going to happen next time around it Well,
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  Speaker 2: the chances are now increased that the same thing happens
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  Speaker 2: next time.
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  Speaker 3: Well, they've changed the rules a little bit so there
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  Speaker 3: can be a partial clearance so long as they meet
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  Speaker 3: those minimum prices, which wasn't the case last year, so
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  Speaker 3: it did get harder and harder to clear the clear
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  Speaker 3: the market last year. Now they can be a partial clearance,
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  Speaker 3: so as long as there's buias for some of those units,
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  Speaker 3: they will sell. But you know, there is a huge
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  Speaker 3: amount of units in circulation at the moment, and these
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  Speaker 3: really come into the market through through alternative ways. So
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  Speaker 3: anything that is any forestry plantings that are registered in
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  Speaker 3: the unit into the ets basically create units. So we've
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  Speaker 3: got this extra supply coming in for forestry. So these
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  Speaker 3: the supply from the government options isn't really needed to stuff,
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  Speaker 3: So is that great?
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  Speaker 2: Is that the problem with why we've got so many.
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  Speaker 2: It's that we just have too many coming in from forestry,
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  Speaker 2: not that we're not using enough. We have too many
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  Speaker 2: coming on.
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  Speaker 3: Yeah, Well, most ets is around the world, there's a
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  Speaker 3: lot operating in a lot for different countries. Most have
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  Speaker 3: a capped supplies. There's a limited amount of supply of
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  Speaker 3: units that can come in. But the way we've set
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  Speaker 3: it up with allowing forestry to be used as offsets
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  Speaker 3: as well, there's real uncertainty around that supply that will
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  Speaker 3: come from forestry. No one really knows who's going to
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  Speaker 3: plant to how many you know, the number of trees
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  Speaker 3: and how many will be registered into the scheme, So
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  Speaker 3: it creates this huge degree of uncertainty. So it can't
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  Speaker 3: really be used as a cap and trade scheme like
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  Speaker 3: it's been used elsewhere by sort of pushing the price
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  Speaker 3: up to encourage the reduction and emissions as the supply
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  Speaker 3: keeps growing.
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  Speaker 2: Now that agriculture has been officially exempt again from the ETS,
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  Speaker 2: are there other sectors who are also hoping for the
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  Speaker 2: same treatment.
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  Speaker 3: I'm really not sure. I think MST the other sectors,
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  Speaker 3: there's you know, there's been our ets and MESO and
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  Speaker 3: does cover a pretty broad range of sectors, particularly compared
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  Speaker 3: with other ATSs around the world. I don't think we'll
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  Speaker 3: see a lot of changes in that. I mean, excluding
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  Speaker 3: excluding agriculture really came down to the fact that most
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  Speaker 3: of the agricultural emissions are methane not CO two, so
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  Speaker 3: a different guests. They're really just treating it differently.
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  Speaker 2: Susan, good to talk to you. Thank you so much.
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  Speaker 2: Susan Killsby Agricultural Economists.
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