Section 3: Governance of advice
1. As an NZ ETS user, have you received poor, misleading or inaccurate advice on NZU prices or ETS trading? If so, how did this affect you, and what was the financial impact?
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PF Olsen are ETS users, specifically we are NZU advisors.
Our consultants, ETS specialists, business development managers, forest managers, harvest managers, and environmental specialists are all supplying ETS advice as an integral part of our forest management services.
We pride ourselves in a high standard of expert advice and to our knowledge have not given poor misleading or inaccurate advice on NZU prices or ETS trading- we have no complaints upheld.
On advice from others to our clients, we have seen different and conflicting advice on tax treatment of NZU sale proceeds from different accountants and tax advisers.
Our consultants, ETS specialists, business development managers, forest managers, harvest managers, and environmental specialists are all supplying ETS advice as an integral part of our forest management services.
We pride ourselves in a high standard of expert advice and to our knowledge have not given poor misleading or inaccurate advice on NZU prices or ETS trading- we have no complaints upheld.
On advice from others to our clients, we have seen different and conflicting advice on tax treatment of NZU sale proceeds from different accountants and tax advisers.
2. As an NZ ETS user, have you received advice with financial implications from an NZU adviser with a real, or perceived, conflict of interest? If so, how did this affect you, and what was the financial impact?
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Many PF Olsen staff giving ETS advice are also NZIF Registered Forestry Consultants. Through the NZIF code of ethics we annually acknowledge, and are cognisant of Conflicts of Interest, real or perceived.
Any potential conflict of interest would be disclosed to the client- this has not arisen to date.
Any potential conflict of interest would be disclosed to the client- this has not arisen to date.
3. To what extent would an education campaign and information pack improve decision-making for users?
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Any information that can be provided to improve decision making for users is obviously useful.
However, the ETS is so complex any generic advice would likely end up so limited in its content to be of any real benefit. Many complex situations arise from the interaction of the multitude of different ETS and forestry scenarios that can occur. Most advice we give to clients is bespoke to a particular forest, piece of land or participant details.
However, the ETS is so complex any generic advice would likely end up so limited in its content to be of any real benefit. Many complex situations arise from the interaction of the multitude of different ETS and forestry scenarios that can occur. Most advice we give to clients is bespoke to a particular forest, piece of land or participant details.
4. What information could help users and traders make informed decisions about engaging with the NZ ETS or selecting an adviser?
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A register of suitability experienced and qualified consultants.
We note our ETS services are likely already covered by the incoming Forests (Regulation of Log Traders and Forestry Advisers) Amendment Act 2020. Our NZU trading and any advice on this is an extension of our forestry in the ETS services.
Consulting foresters can be commissioned to provide forestry advice and NZU market advice within the same project.
We do not want to be double legislated.
We note our ETS services are likely already covered by the incoming Forests (Regulation of Log Traders and Forestry Advisers) Amendment Act 2020. Our NZU trading and any advice on this is an extension of our forestry in the ETS services.
Consulting foresters can be commissioned to provide forestry advice and NZU market advice within the same project.
We do not want to be double legislated.
5. To what extent would voluntary guidelines for advisers improve the quality of their advice?
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We don’t see that voluntary guidelines will improve advice. Professionals should already be providing quality advice. The fact that there have been complaints of the nature listed on page 21 indicates that some professionals are not providing quality advice. We don’t see how voluntary guidelines can change this situation?
6. What should be included in the guidelines to improve the quality of advice?
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We don’t see that voluntary guidelines will improve advice.
7. To what extent would a code of conduct, registration and licensing framework for advisers improve the quality of their advice?
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We note our ETS services are likely already covered by the incoming Forests (Regulation of Log Traders and Forestry Advisers) Amendment Act 2020. Our NZU trading and any advice on this is an extension of our forestry in the ETS services.
Consulting foresters can be commissioned to provide forestry advice and NZU market advice within the same project.
We do not want to be double legislated.
Consulting foresters can be commissioned to provide forestry advice and NZU market advice within the same project.
We do not want to be double legislated.
8. What content would you expect in a code of conduct for advisers?
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Competence
Conduct
Conflicts of interest
Continuing professional development
Complaint’s procedure
Conduct
Conflicts of interest
Continuing professional development
Complaint’s procedure
9. Which licensing requirements and standards would you expect for an adviser?
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We note our ETS services are likely already covered by the incoming Forests (Regulation of Log Traders and Forestry Advisers) Amendment Act 2020. Our NZU trading and any advice on this is an extension of our forestry in the ETS services.
Consulting foresters can be commissioned to provide forestry advice and NZU market advice within the same project.
We do not want to be double legislated.
Consulting foresters can be commissioned to provide forestry advice and NZU market advice within the same project.
We do not want to be double legislated.
10. What other changes, if any, could improve the quality of advice in the NZ ETS?
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We have on occasion been given conflicting advice on application of the regulations from Te Uru Rakau. We know enough about the ETS to ask again for clarification. Certainty of advice out of Te Uru Rakau when querying the regulations is crucial.
Section 4: Governance of trading
11. To what extent would more visibility on the price or volume of other NZU trades improve transparency in the NZ ETS, and better inform your decisions about buying and selling?
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Currently we determine the market price of NZUs from two main exchange- based platforms and a daily email newsletter distributed by a direct trader we are linked to.
Only one existing platform indicates volume traded.
For comparison, we also do not have detailed sales prices or volumes of our competitors in other forest products, e.g. domestic or export log sales. This is commercially sensitive information.
The Ministry for Primary Industries collate and make publicly available log price data, trade exports, on a quarterly basis. And estimated roundwoods removals on an annual basis. This historical view does not inform buying and selling decisions in the log market.
Live price or volume data could only work through an exchange-based platform (which we do not support). Any historical data collated would be of interest but could not inform buying and selling decisions.
Only one existing platform indicates volume traded.
For comparison, we also do not have detailed sales prices or volumes of our competitors in other forest products, e.g. domestic or export log sales. This is commercially sensitive information.
The Ministry for Primary Industries collate and make publicly available log price data, trade exports, on a quarterly basis. And estimated roundwoods removals on an annual basis. This historical view does not inform buying and selling decisions in the log market.
Live price or volume data could only work through an exchange-based platform (which we do not support). Any historical data collated would be of interest but could not inform buying and selling decisions.
12. What other types of information would make trades more transparent?
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Overall scale of market activity (quantity of trades and trade volumes – e.g. monthly, quarterly, collated in aggregate.
13. To what extent has credit and counter-party risk affected your ability to buy or sell NZUs? What was the financial impact on you?
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Not an issue generally. NZUs can be used as security (deliver before payment) when buying. Generally, only deal with counterparties that are already “onboarded” with credit risk reviewed and accepted in advance.
14. As a NZ ETS user, what impact would voluntary transaction reporting have on your business or trading activity?
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No impact.
If it’s voluntary and the dataset isn’t complete, then what is the point?
If it’s voluntary and the dataset isn’t complete, then what is the point?
15. As a NZ ETS user, what impact would position reporting have on your business or trading activity?
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NZUs held can be taken direct from the NZ Emissions Unit Register, therefore removing the disadvantage of self-reported data and administrative burden?
Compliance obligations such as post-1989 surrender requirements at time of harvesting need to be part of the position calculation as these units may not be traded.
Compliance obligations such as post-1989 surrender requirements at time of harvesting need to be part of the position calculation as these units may not be traded.
16. As a NZ ETS user, what impact would exchange-based trading have on your business or trading activity?
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We do not support the requirement for exchange-based trading. We trade through existing exchange-based platforms and also trade directly with counterparties. This gives us a range of options at different price points, commission structures, delivery and payment timing, and counterparty risk. This variety of counterparty options gives flexibility to meet the varying buy/sell objectives of our clients. In our experience the counterparty that best meets trade objectives can differ from day to day.
Transfer pricing may not reflect the current market due to deal structure, and exchange requirements would likely add needless administration costs.
Transfer pricing may not reflect the current market due to deal structure, and exchange requirements would likely add needless administration costs.
17. What other options could increase transparency of trades, or reduce market risks associated with trading NZUs?
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In-built escrow or clearing facility within the NZ-ETR to help with counterparty risk on arm’s length transactions with new counterparties.