Spot NZUs fell 2.1% this week to close Friday at NZ$9.27 ($6.18), their lowest level in eight weeks, as larger-than-average supply came to market, allowing buyers to pull back a little.

The closing price was 20 NZ cents below last week, with around 500,000 allowances changing hands, or roughly double the average weekly volume.

“There is quite a lot of volume hitting the market, so I think buyers are waiting to see if that’s it, or if there’s more to absorb,” one market participant said.

Stakeholders have one more week to provide input to the government on the priority issues in the ETS review, mainly whether or not to abandon the 2-for-1 provision.

Most observers expect the provision to go, which would drive up demand and potentially prices in the longer run.

However, a recent Westpac report said that if the 2-for-1 rule goes, the government might double the free allocation to so-called EITEs – emissions-intensive trade-exposed industries such as manufacturing – which would offset a significant share of the increase in demand.

“We expect prices to consolidate at these levels over the next few weeks while the level of uncertainty remains high among market participants before breaking resistance up through the $10 levels,” said brokers OM Financial.

By Stian Reklev – stian@carbon-pulse.com

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