Spot NZUs rose 2.9% over the week to close Friday at NZ$5.40 ($3.86), a second straight week of minor gains as traders began looking ahead after finalising the compliance process for 2014.

The spot allowances gained 15 NZ cents on last Friday amid healthy volumes, causing some observers to suggest the price has flattened out for now, although a surge is most likely not on the cards.

“There appears to be little … momentum to take us much lower; we expect demand to increase in the second half of this year as it seasonally has in previous years,” brokers OM Financial said.

News this week that Treasury had suggested to the government to implement measures to raise the price, such as removing the 2-for-1 rule or introducing a price floor created some expectations in the market that the ETS review later this year might lead to some changes in the scheme.

But the review is unlikely to begin until after New Zealand has published its INDC, probably in July.

So far the government has been tightlipped about potential targets for the post-2020 period, although Prime Minister John Key this week dismissed calls from the Greens to aim for a 40% cut from 1990 levels by 2030, saying it would be too expensive.

The government has indicated it will amend the ETS in accordance with its new target, to ensure the scheme helps New Zealand achieve the goal.

By Stian Reklev – stian@carbon-pulse.com