January 28, 2011 / 3:42 AM / 10 years ago

New Zealand spot carbon price rebounds as CERs rise

WELLINGTON, Jan 28 (Reuters) - New Zealand carbon prices ended a month-long slide to trade higher this week, tracking a recovery in European carbon prices.

Spot permits under New Zealand’s emissions trading scheme were trading at NZ$19.30 ($14.85), according to calculations by Thomson Reuters subsidiary Point Carbon, up 20 cents on a week ago.

About 200,000 NZUs, or New Zealand Units, were traded over the week, according to brokers, around half the previous week’s volume.

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

Brokers said the market continued to be driven by the price of European permits, which rallied over the previous week.

“Buyers have been increasingly active late this week as several emitters aim to purchase compliance units prior to the Chinese New Year,” analysts at Westpac said in a note to clients, referring to the Feb 3-6 holiday in many parts of Asia.

Forwards also rallied in line with European prices, with the March 2012 contract valued at NZ$20.60, up from NZ$19.90 a week ago.

December CERs closed on Thursday at 11.15 euros , according to Reuters Data. The contract gained as much as 3.4 percent this week, before retreating on profit-taking.

The European trading scheme is the largest buyer of CERs and therefore a rise in European permits, called EUAs , also drives CER prices.

This in turn has recently affected the prices of New Zealand units because CERs can also be imported and used to meet emissions obligations in the New Zealand scheme.

EU allowances tumbled back to near 14.50 euros on Thursday after scaling a fresh eight-week high above 15 euros. The ICE ECX December 2011 EUA contract ended on Thursday at 14.72 euros, down 19 cents or 1.3 per cent.

Brokers say there is no reason for NZUs to trade at a premium given the large volume of CERs available in the international market. So CERs are setting the tone of pricing in the New Zealand market at present.

The New Zealand market, the only national emissions trading scheme outside the European Union, was initially marred by a lack of supply, but has been ramping up since July 1 when the scheme was expanded to include energy producers, industry and the transport sector, which account for about half of the country’s emissions.

Under transition measures, emitters such as power generators and refiners have the option of paying a fixed NZ$25 per tonne of carbon pollution until January 2013 or buying from the market.

($1 = NZ$1.30)

(By Stian Reklev of Point Carbon News and Adrian Bathgate in Wellington; Editing by David Fogarty)

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