Spot NZUs rose 1.5% over the week to close Friday at NZ$6.85, 10 NZ cents above last Friday’s two-month low, but the market is still suffering from uncertainty over what the upcoming ETS review and Paris climate talks might bring.

The spot contract traded in a tight NZ$6.80-6.85 range over the week, and ended in the high end of the range, but with only moderate volumes changing hands.

Market participants still await news on the ETS review, and few traders expect the price to break out of the current equilibrium one way or the other until the government provides some sort of signal on what to expect.

New Zealand was one of several developed nations that ended up in the spotlight for the wrong reasons at this week’s UN climate talks in Bonn, when analysts Climate Action Tracker listed NZ among nations whose post-2020 target puts the world on track to miss the 2C target.

Some observers speculate that the cool international response to New Zealand’s INDC might bring pressure on the government to up its climate ambition, which would be reflected in changes to the ETS as well.

“Policy is the likely driver of the carbon price over the next six months and we expect COP21 should stir some life into this market. We still believe tighter policy settings for our ETS mean price risks are weighted to the upside,” brokers OM Financial said.

However, the government this week launched a process to award new offshore oil and gas exploration permits, which is likely to increase greenhouse gas emissions down the line.

Meanwhile, the Greens released a new climate policy platform, maintaining its position that the ETS should be replaced by a NZ$25 carbon tax, although it does not seem realistic that policy would be implemented anytime soon.

By Stian Reklev – stian@carbon-pulse.com

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