Spot allowances in the New Zealand carbon market rose 5.5% on Tuesday to NZ$11.60 ($7.88), extending the gains made this year as buyers moved to lift any sizeable offer in a market where most sellers are happy to wait for prices to go higher.

The price hit NZ$11.30 early on, 30 cents higher than Monday’s close, before climbing to NZ$11.55 on Carbon Match and NZ$11.60 on CommTrade in the last hour of trading.

The NZ$11.60 trade was for 100,000 NZUs and the highest price in the New Zealand ETS since Nov. 2011.

The price is now up 23% since the turn of the year.

“When buyers see decent volumes, they just take it,” one broker told Carbon Pulse.

The sell side remains thin as forest-owners, the main NZU supply source, are confident prices will continue to climb after the government announces the outcome of the ongoing ETS review.

Climate Change Minister Paula Bennett last month gave a firm indication the government will drop the 2-for-1 provision, a move that would nearly double market demand.

But the government has yet to indicate when the ETS review outcome will be announced.

There is also uncertainty as to how quickly the 2-for-1 rule would disappear. It might be done in one go at a date in the near future, or it might be phased out gradually over several years.

At this stage, a phase-out over years might have a bearish impact on NZU prices.

But for the short-term, the market sentiment remains bullish, with one source predicting NZUs could trade above NZ$12 by the end of the week.

By Stian Reklev – stian@carbon-pulse.com

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