Spot NZUs closed at NZ$9.25 ($6.12) on Friday, down just 2 cents from last week having bounced back from a 9-week low of NZ$9.15 on Wednesday as rich supply depressed prices.

The spot contract recorded losses for a sixth consecutive week amid higher than average supply, but the price remains 40% higher than it was in late September.

Brokers OM Financial said in an email Friday it had 300,000 NZUs offered at NZ$9.30, a relatively large amount in the New Zealand carbon market.

Profit taking drove much of the increased supply, market participants said, as some traders sought to offload allowances they had bought steadily as the price rose from NZ$6.50 last autumn.

Friday marks the deadline for the public to comment on the priority issues in the ETS review, and while other issues remain open until Apr. 30, there may be an announcement from the government on its intentions the 2-for-1 provision and the NZ$25 price cap sooner rather than later.

“We have anecdotal evidence suggesting a growing cause for the removal of the current two-for-one credit arrangement,” OMF said.

Ending the 2-for-1 would most likely see demand increase, although to what degree would depend partly on whether the government keeps free allocation to emissions intensive, trade-exposed industries at current levels, or doubles it to compensate for the increased compliance obligation.

By Stian Reklev – stian@carbon-pulse.com

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