NZ carbon rebounds as buyers return

Reuters

Spot permits in New Zealand’s emissions trading scheme gained 3.2 per cent this week to close on Friday at NZ$3.25, as firmer demand and dissipating supply put an end to five straight weeks of losses, traders said. The spot New Zealand Units gained 10 cents from last Friday as emitters came in to pick up permits offered at prices 25 per cent lower than two months ago.

“There remains support from buyers in the low 3s as they continue to accrue units for their liabilities,” one trader said.

At the same time supply dried up from foresters, who have steadily been swapping their NZUs for cheaper Emissions Reduction Units with a view to handing them over to the government and exiting the scheme.

The New Zealand carbon market allows companies to meet all their liability by using UN-issued credits such as ERUs.

“The flow of post (foresters) exiting has slowed this week but we do expect it to continue as the ratio of ERUs to NZUs is now over 16 to 1 when it was 13 to 1 earlier,” one broker said.

ERUs, which are mostly generated from emission-cutting projects in Eastern Europe, on Friday traded at 18 NZ cents.

The low ERU price means most companies with liabilities under the scheme continue to buy ERUs for their short-term needs, but since the government refused to sign up to new legally binding targets under the Kyoto Protocol, NZ firms will lose access to UN-issued carbon credits after 2015.

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