BNZ Carbon NewsFriday 20 May 2011  With 31 May being the final date for compliance buying for New Zealand based emitters, many market participants have been expecting the NZU price to rise in the last few weeks. However, it appears that emitters brought their units earlier in the year as demand has been thin and the price has drifted lower finishing at NZ$20.05. An estimated 255,000 NZUs changed hands over the last week, 75,000 fewer than the prior week. Most of the buyers in the market now are looking to cover 2011 emissions so will not need to surrender units until 31 May 2012, further lowering demand. Reports from brokers also indicate demand is low and supply will only come to market if the price rises above current levels. The NZU price has also been impacted by offshore markets, all of which have reported lower carbon prices on very low volume. The Regional Greenhouse Gas Initiative (RGGI) scheme that is operating on the East Cost of America did not report any trades last week. Californian carbon allowance units (CCAs) did not trade either. In Europe, EURs closed at €16.68 ($30.34) after trading as high as €17.30 ($31.47) at the beginning of the month. This is in the face of rising crude oil and natural gas prices and lower coal prices, all of which generally point to higher EUR prices. Political developments have also been modest. There have been no clear signals from the German government about whether it intends to phase out older nuclear plants. If they do choose to switch from nuclear power to a more emissions intensive form of electricity generation, demand for EUAs and CERs are likely to increase. Australia is making some progress in advancing the CPRS (their equivalent of the NZ ETS). They are expected to unveil a fixed carbon price of AS15 - A$30 moving to a full trading scheme at some stage in 3 - 5 years. The latest government projections show that 2020 Australian greenhouse gas emissions are likely to be 24% above 2000 levels, well above the target of a 5% increase. Emissions from LNG are a considerable part of this increase. Total LNG emissions could be twice the 27 million tpy produced by coal. Although clean to burn, CO2 is emitted during the extraction and chilling process. Coal is the opposite, there are some emissions from extraction but most occur on combustion. If Australia enters into an emission trading scheme and their trade partners, China and India don’t, there will be a perverse incentive at a private level for Australia to extract less LNG and more coal.
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