Spot NZUs traded at NZ$10 on Thursday, the first time the contract has seen double digits since Dec. 7, 2011, as confidence grows that the government will introduce rule changes to boost demand.
Allowances have climbed steadily throughout the week after opening at NZ$9.50 on Monday, and broke through the NZ$10-level on CommTrade around midday Thursday.
Trading also opened at NZ$10 on online trading platform Carbon Match.
The contract eventually closed at NZ$10.05.
Brokers OM Financial have dealt over 500,000 NZUs in the past two days, far more than regular volumes in the New Zealand carbon market.
“People are starting to realise the inevitable, that prices will rise,” OMF broker Nigel Brunel told Carbon Pulse.
The ongoing ETS review continues to be the main driver of the price rise, with Climate Change Minister Paula Bennett injecting momentum into the market last week when she said NZUs need to go higher.
“The minister has stated that carbon costs need to rise for the ETS to work properly, the ETS has come up short in the environment ministry’s own evaluation and there seems to be pretty clear intent to fix it in the ETS review document,” one market participant said.
“Separately, today there has been a proposal to develop a national economy wide renewable energy target. None of those things would seem consistent with lower carbon prices.”
Most market participants expect the 2-for-1 provision to be removed, which would nearly double market demand.
By Stian Reklev – stian@carbon-pulse.com
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