Spot NZUs finished the week on a high, moving up NZ 25 cents on the day to close at NZ$7.05 ($4.76), up 2.6% on last week, despite a largely indifferent reaction to the INDC.
The contract traded in a narrow NZ$6.75-6.90 range for most of the week, but firmed up on Friday as some buy interest came in, according to market participants.
Tuesday’s announcement that New Zealand will cut emissions to 11% below 1990 levels by 2030 failed to move the NZU price, as the many uncertainties about the plan meant it did not provide a strong price signal.
“A lot of people want it to be positive for the price, but I’m not sure it really is,” one market source told Carbon Pulse.
The government was widely criticised for being too unambitious, and the wording in the INDC suggests it will rely heavily on the international carbon market to meet the target.
But traders welcomed Climate Change Minister Tim Groser’s comments that the government will set out to review the ETS, and might make adjustments to the scheme that could have a bullish price impact.
Analysts expect the review will lead to the phasing-out of the cost control measures over the next few years, such as the 2-for-1 rule and free permits, but few expect the government to make deep changes to the national carbon market.
A first indication of the market’s outlook might appear early next week, when brokers OM Financial will announce the result of a tender in which one of its clients is offering 200,000 NZUs, but may sell as many as 1 million allowances.
By Stian Reklev – firstname.lastname@example.org