Spot NZUs closed at NZ$6.70 ($4.26) on Friday, unchanged from last week as traders remained largely passive amid a lack of signal from the government on what the upcoming ETS review might bring.
The price jumped up to NZ$6.85 on Monday as buyers snapped up some 80,000 allowances on the day, but has drifted since and by closing time Friday was back where it settled last week.
The spot NZUs has not traded outside the NZ$6.70-7.00 range since July 13.
Government data showed that renewable energy’s share of the generation mix in the June quarter stood at 83%, the highest level since Q4 2013.
“With plenty of water in the hydro lakes and a big snow melt coming, thermal generation looks set to be only a thin slice of the pie in the fourth quarter,” brokers OM Financial said, indicating this might further dent demand.
But the key issue of New Zealand carbon traders remains the upcoming ETS review.
The review is unlikely to be finalised until after the UN climate talks in Paris in December, but the government has yet to initiate the process or even release details on the scope of the review, causing some market participants to voice concern over the lack of government communication.
“There is absolutely no connection or communication between the government and the market, it never has been,” one source complained.
Market participants have predicted the review might put an end to the 2-for-1 rule and outline a time table for phasing out allocation of free NZUs, but the final result will rely on the outcome in Paris.
By Stian Reklev – email@example.com