There’s life in the NGAS scheme yet.
There has been a lot of hoo-haa about the so called crisis in the New South Wales NGAS scheme. As Kristen Le Mesurier blogs in More innovators destroyed by botched policy;
On Tuesday NSW Premier Morris Iemma announced what has long been suspected: the State’s first carbon emissions trading scheme is on the brink of collapse. Of course this is terrible news for the environment - there goes another incentive for industry to cut emissions.
The death of the NSW NGAS scheme has been over-reported in my opinion. If you really look through the FUD and EBG’s astoundingly cheeky media call, you’ll see that the only credits to have lost any value under the scheme have been so-called Demmand Side Abatement credits, or DSA NGACs which flooded the market when EBG and others hired a small army of kids to roam the city swapping lightbulbs. The maths behind DSA is sketchy at best and many of us in the industry have always steered clear of them for that reason. Recent federal announcements of manditory lightbulb replacement put-paid to any future for those credits. The market, faced with a tarnished product in vast oversupply did the right thing and the price collapsed. this is pretty much economics 101.
But forestry NGACs for example have held their value nicely, and as the NETS emerges, or if Mr Rudd ratifies Kyoto, Forestry NGACs will almost certainly be uplifted into the wider pool, and their value will climb, at least initialy.
So it’s just wrong to say the whole scheme is collapsing. It’s actually working very well.
The only part of the scheme to collapse has been the part that really needed to in order to prove that the market system really would work. DSA credits were the market’s sacrificial lamb, and widely understood to be. If the value of DSA NGACs had not collapsed then we’d have had cause to suspect overt interference in the market. It’s a shame no-one thought to explain this to Mr Iemma who seems to have been scared into a lather by a couple of well timed press releases. — DS
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