Spot NZUs weakened over the week and volumes dropped as buyers stepped back, awaiting clarification from the government on new market rules.

The spot contract closed Friday at NZ$14.30 ($9.73), down 20 cents or 1.5% on last week but still within reach of the year-high NZ$14.65 hit earlier this month.

Volumes have been generally high in recent months as the price has shot up from levels below NZ$10 in January, but trading activity slumped this week, according to market participants.

“Buying interest has backed away from the market as participants look to be awaiting the NZ budget report on the 26th of this month,” said brokers OM Financial.

Some observers expect Climate Change Minister Paula Bennett to reveal some outcomes of the ETS review in connection with the budget release, such as the future of the 2-for-1 provision and whether the NZ$25 price cap will remain.

Meanwhile, traders said most emitters have now bought the allowances they need ahead of the May 31 annual compliance, meaning there is little immediate demand in the market.

By Stian Reklev – stian@carbon-pulse.com

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