NZ Market: Strong push from buyers extends NZU gains

Published 07:09 on April 11, 2016  /  Last updated at 12:00 on April 11, 2016  /  Asia Pacific, New Zealand  /  No Comments

Continued demand from emitters pushed NZUs to new highs on Monday, while some observers urged the government to announce the ETS review outcome sooner rather than later in order to bring certainty for market participants.

Continued demand from emitters pushed NZUs to new highs on Monday, while some observers urged the government to announce the ETS review outcome sooner rather than later in order to bring certainty for market participants.

Spot NZUs gained another 5.4% or 65 cents to continue the recent bullish trend, with prices hitting NZ$12.65 ($8.62) on over 200,000 allowances changing hands.

Some buyers are in the market to cover short positions for 2015 after recently finalising last year’s emissions data, while a growing number of new buyers have stepped in with the expectation that the government will drop the 2-for-1 rule, potentially forcing emitters to surrender twice the amount of NZUs next year.

The price for New Zealand carbon allowances has increased 34.6% since the start of the year and some 62% since the government announced the ETS review on Nov. 24.

Cabinet ministers have made it clear that they want to see the NZU price go higher in order for the ETS to help drive emission reductions, which has added momentum to the market.

But some observers are now calling for the government to clarify the outcome of the review to reinstate some long-term certainty for scheme participants, or at least to let the market know when the decision will be announced.

“The government should pre-announce what date they expect to release the details,” one observer told Carbon Pulse.

“Until then it’s just a betting market, with some thinking the 2-for-1 will disappear on Jan. 1, 2017, and others thinking it will be gradual.”

“It is all very frustrating and I don’t know if the government fully appreciates that this is more than a straight compliance market,” the observer added.

The public consultation period for the 2-for-1 provision and the NZ$25 fixed price option closed in February, while the government is still taking comments on other issues until the end of this month.

By Stian Reklev – stian@carbon-pulse.com

Not yet signed up to CP Daily? Subscribe to our free newsletter here

Comment