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Carbon markets unfazed by Trump pull out

NZN 2/06/2017 Rebecca Howard

Carbon markets in Europe and in New Zealand are taking news the US will pull out of the Paris Agreement in their stride as countries around the world reaffirm their commitment to the accord.

In a widely expected outcome, US President Donald Trump said the US will begin negotiations to either re-enter the accord or start a new deal on "terms that are fair to the United States, its businesses, its workers, its people, its taxpayers".

Prices of European carbon credits dipped from 5.10 euros per tonne of CO2 on May 30 to 5.05 euros on June 1, according to data on the European Energy Exchange, but did push up from 4.48 euros at the beginning of May.

There may be some action when the market reopens later in the global trading day but "it was hardly a surprise," said Nigel Brunel, director, financial markets for OMF.

Mr Brunel said the withdrawal of the US will make it more challenging to reach the targets set out in the Paris Agreement.

He said, however, there is quite a bit of resolve among other countries and the US pull-out is "a little bit like having that grumpy guest at the party that finally leaves, or the kid who picks up his ball and goes home".

He noted that the US represents only 17 per cent of global emissions.

Lizzie Chambers, at Carbon Match, a web-based emission unit trading facility, said spot prices in New Zealand had been steady around $16.70 for the past few days and trading had been extremely light.

She said President Trump's decision might have an impact on sentiment at the margin "but doesn't change our fundamentals".

She underscored that under the terms of New Zealand's commitment it has to find roughly 230 million tonnes of emissions reductions over the decade from 2021 to 2030.

"That's not nothing. It's going to take quite a bit of work and some luck and a carbon price that needs to be more than $16," she said.

The Paris Agreement came into force last November and 147 of 197 signatory nations have ratified the agreement, according to the United Nations.

New Zealand also reaffirmed its commitment.

"It's really disappointing the US has chosen to withdraw from the Paris Agreement, but New Zealand remains absolutely committed to it," Minister for Climate Change Issues Paula Bennett said.

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