New Zealand carbon allowances finished the week on a strong note, pushing through the NZ$12 ($8.14) barrier for the first time since Nov. 2011 as buyers aggressively stepped into the market.

Spot NZUs gained 9.1% over the week and set new year-highs in three out of five sessions.

Friday saw NZUs close at NZ$12, the highest level in nearly four-and-a-half years.

“All offers were swept as the market traded up to $12. We see more sellers entering the market at this level while buyers continue to line up. We still expect higher prices to come,” brokers OM Financial said.

As has been the case for nearly six months, prices are driven by expectations that the government will remove some of the regulations put in the place in 2009 to ensure the ETS does not get too costly for industry.

Climate Change Minister Paula Bennett has signalled she might ditch the 2-for-1 rule. In addition, government officials are considering whether to remove the fixed NZ$25 price option, which effectively caps the NZU price.

Most observers expect prices to move up significantly in the longer term and many buyers are eager to purchase whatever they can at current levels, to put aside for future compliance use.

By Stian Reklev – stian@carbon-pulse.com

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