http://af.reuters.com/article/commoditiesNews/idAFL4E7JJ00220110819

 

New Zealand carbon prices rose steadily over the previous week, tracking a rebound in international carbon markets, although trading volume was light.

 

Spot permits under New Zealand's emissions trading scheme were traded at NZ$15.30 ($12.54), brokers said, compared with the previous week's price of NZ$14.25.

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

About 150,000 NZUs were traded over the week, according to brokers, and with the next surrender date not until early 2012 there is little urgency seen in the market.

"With many emitters having met their accrued liability through CERs and many foresters holding onto their units for better pricing there has been light trading," analysts at Westpac Bank said in a note to clients, referring to U.N. offsets called Certified Emissions Reductions.

Forestry is a major source of NZUs because long-term tree plantations soak up large amounts of carbon dioxide from the air. The tradeable permits are meant as a sweetener for forestry investors.

The price for CERs closed at 8.52 euros (NZ$14.90) on Thursday, benefitting from a European carbon market which has rebounded strongly since the start of last week on firmer energy prices.

The scheme allows polluters to buy CERs to meet their obligations and a recent plunge in international carbon prices and a weakening euro led to a surge in buying of the U.N. offsets in recent weeks, effectively setting a cap on NZU prices.

The CER market is also far more liquid, allowing New Zealand polluters to hang on to them to meet obligations under the scheme or sell them for profit later if CER prices rise.

"The direction of our carbon price is solely in the hands of the European carbon market and whilst a recovery in CER prices occurred through the week until last night, the volatility remains and it will be a rocky recovery at best," said Nigel Brunel of brokerage OMFinancial in a note to clients.

The New Zealand market, the first national scheme outside Europe, has seen relatively light trade since it was ramped up from July 2010 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$1.22)