NZ spot carbon prices recover from sell-off

Fri Mar 2, 2012 1:34am GMT

WELLINGTON, March 2 (Reuters) - New Zealand carbon prices inched up on Friday, steadying from a sell-off in the past week that tracked a reversal in the European market following a rally on moves to possibly limit European carbon permits.

European carbon prices rallied on Thursday, rebounding sharply after posting steep losses earlier this week. The bellwether contract climbed to an intraday peak of 8.72 euros, not far from a 10-week high of 9.63 euros hit on Tuesday .

Spot permits under New Zealand's emissions trading scheme were seen trading around NZ$7.95 ($6.67), brokers said, edging up from a closing price of NZ$7.85 on Thursday. New Zealand emissions unit (NZU) prices found their footing after sliding from NZS$8.40 in the past week.

Despite the losses, selling momentum in NZUs has lost some steam in recent weeks, having picked up in late 2011 as investors sold domestic units into relatively cheaper European green Certified Emmissions Reduction credits (CERs) .

The selling has narrowed the spread between NZUs and CERs to around 15 NZ cents, down significantly from around NZ$1.30 earlier this year. Last month, New Zealand credits briefly fell below their European counterparts.

With much of the premium on NZUs now wiped out and prices down significantly from around NZ$20 a year ago, market participants said the incentive to dump domestic units had dissipated, and that further selling would be limited.

"With NZUs under NZ$10, forest owners don't really want to sell," said Nigel Brunel, an analyst at OM Financial. "Given that they were at NZ$20 not too long ago, they don't want to sell down here, it's not worth it at these levels."

The fall from levels around $20 was sparked by weakness in the European market.

Each permit represents a tonne of greenhouse gas emissions. The scheme is designed to help curb output of emissions blamed for causing global warming.   Continued...

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