FACTBOX-New Zealand emissions trade plan set for supply boost

July 14 (Reuters) - New Zealand's fledgling emissions trading scheme, the only national scheme outside Europe, stepped up from July 1 with the addition of industries that emit half the nation's greenhouse gases.

But trading remains muted, bedevilled by lack of supply of offsets called New Zealand Units, with NZU prices trading below the NZ$25 price cap. [ID:nSGE6600L4]

In coming months, though, the supply picture is expected to change sharply as sectors entitled to free allocations of NZUs start to receive their offsets and as demand grows from companies that must meet carbon emissions obligations.

Here are details of the estimated number of NZUs due to be issued during this year until the end of 2012, when the scheme's first commitment period ends.

TARGET

New Zealand's total greenhouse gas emissions have risen 22 percent since 1990, the base year of the Kyoto Protocol. The country has pledged to have no increase from 1990 level emissions during Kyoto's 2008-2012 first commitment period.

The emissions trading scheme is meant to help New Zealand meet its target, with forests that soak up large volumes of carbon dioxide playing a key role.

The country's total greenhouse gas emissions were nearly 75 million tonnes in 2008. Each NZU represents a tonne of emissions.

For factboxes on New Zealand's emissions profile and main points of the trading scheme, click on [ID:nSGE6600L7] and [ID:nSGE6600L6]

FLOW OF NZUs

* Forestry. By far the largest source of NZUs, totalling roughly 75 million between 2008 and 2012.

-- So far only about 5 million NZUs have been issued to owners of post-1989 forests, or those covered by Kyoto rules. Forestry was the first sector in the scheme launched in 2008.

The Ministry of Agriculture and Forestry forecasts it will distribute a further 53 million NZUs over the rest of the first commitment period, or an average of 18 million per year, although fewer forestry owners have opted into the scheme than expected.

-- Pre-1990 forests, or those not covered by Kyoto rules.

The first tranche of payments to pre-1990 foresters is expected to be about 17 million NZUs, paid out as applications are received. Based on an Aug 1 start for applications, these units will start arriving in holding accounts by mid-September.

A second tranche of roughly 25 million units will be allocated during 2013 in one go.

* Emissions intensive trade exposed industries. Roughly 11.7 million NZUs are to be issued during three periods till end-2012 to exporters.

The government last week sought applications from firms in 12 sectors for free allocations with the level of assistance between 90 and 60 percent. Sectors include aluminium smelting, production of cartonboard and methanol.

-- Fishing. Firms in the sector will get 700,000 free NZUs to make up for higher fuel prices. July 30 is the application deadline.

CURRENT NZU PRICES Brokerage OMFinancial says emitters are buying NZUs at around NZ$18 but there are few sellers, as many wait for prices above NZ$19. Buyers are firms such as utilities and refiners that face carbon costs.

IMPACT OF NEW SUPPLY

Climate change advisory firm Frazer Lindstrom said firms' use of allocations will be dominated by scheme compliance requirements.

"Some firms will be net short and some will be long in terms of trading positions, and for many the strategy as to what to do is not yet established," said the firm's Stuart Frazer.

"In many cases people are waiting to see how many units they have. If they have excess units they may well sit on them, and if they're short of units then they've still got the government's fixed-price option to fall back on." (Sources: Ministry of Agriculture and Forestry and Ministry for the Environment) (Reporting by David Fogarty and Adrian Bathgate; Editing by Clarence Fernandez)