January 20, 2012 / 1:22 AM / 8 years ago

New Zealand spot carbon price pushes off lows

WELLINGTON, Jan 20 (Reuters) - New Zealand carbon prices pushed higher over the week on improved demand from investors returning from holiday, but the market still suffers from low volumes and prices hover just above record lows.

Spot permits under New Zealand’s emissions trading scheme rose around 4.5 percent to NZ$7.00 ($5.60), brokers said. Prices in the previous two holiday-thinned weeks were the lowest on record.

European prices gained more than 7 percent to reach a five-day high of 7.35 euros, as markets were lifted by the solid and positive results from two sovereign debt auctions.

In the secondary market for U.N.-backed carbon credits, front-year CERs traded up 38 cents or nearly 11 percent to 3.87 euros. On Monday they hit an all-time low of 3.28 euros.

Markets have also had to contend with the issue of more than 8 million U.N-backed units, while cash-strapped Greece sold 1 million spot European Union emissions permits at 6.76 euros each on Wednesday. A further auction of 1 million units planned for Jan 25.

Around 75,000 NZUs were traded over the week, about half the average sales in the second half of last year. Each permit represents a tonne of greenhouse gas emissions. The scheme is designed to help curb output of emissions blamed for causing global warming.

An analyst noted that the New Zealand market is seeing foresters, who were sellers of high-priced units last year, turn into buyers.

“They can enter the market, purchase back the units they sold at these low levels effectively locking in a ‘carbon profit’, reducing their future liabilities to zero, and create the option to sell again in the future when the price recovers,” said Daniel Crawford of OM Financial.

He said this would have consequences for the future supply of NZUs, but this would create an opportunity for a new product, the “Greened CER”, which excludes CERs based on industrial gases and large hydro-electric projects.

“It creates opportunities for those who hold NZUs to swap their holdings for Green CERs, bank a profit/or reduced carbon cost, and walk away with no change to their liability or obligations,” Crawford said.

($1=NZ$1.25) (By Stian Reklev of Point Carbon News and Gyles Beckford in Wellington; Editing by Clarence Fernandez)

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