$20 carbon price before the end of the year

Friday 7 Oct 2016

Spot NZUs are currently $18.80 per tonne. The market continues to consolidate at present levels and sits near its 5 year high. “It’s only a matter of time in our view that $19 will trade as large sellers remain absent and demand is expected to increase over the next two quarters as buyers finalise their 2016 requirements and annual demand increases from Q1 as the one for two unwinds from January next year” says Nigel Brunel, OM Financial Limited.

“To put this in some perspective – the gradual unwind of the one for two setting starting in January 2017 will see demand increase by approximately 600,000 tonnes per month. The market has been averaging 1.25 million per month at OMF for the last 15 months and whilst we are not the entire market – it’s a significant increase in demand that has to be met. Therefore – we expect prices to continue to rise”.

We remind customers and readers – the ETS is a politically created market where buyers have to buy but sellers don’t have to sell. The major owners and sellers of carbon are seeing very good prices for logs and that is their day to day business – not carbon. Our view remains that we will see the $20 level trade before year end.

In other news - New Zealand has ratified the Paris Accord. It comes into force when 55 countries representing 55% of emission ratify. At present 63 countries representing 52% of global emissions have ratified.

New Zealand was very keen to be in the first 55%. It wants to be seen to be leading and not following. This is because the design and implementation of international markets are crucial to New Zealand meetings its 2030 target. Being part of the group that ratified prior to the ratification target being met means we can be part of those discussions on international markets.

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