Carbon Match market update

Wednesday 22 Jan 2020

2020 - Well we are back at it and NZUs are at all new record levels - There's been a little bit of "I’m all for it, but you go first" as people drift back from summer holidays, still needing to digest the finer details of the Government’s proposals on future ETS settings.

But back we are and any which way you look at it the jump up from pre Christmas levels has been noteworthy. We are now $4 higher than prior to the announcement of the ETS settings consultation, details of which emerged after the Carbon Match platform had closed for Christmas.

Since reopening at the beginning of last week we’ve seen prices firm from $28.60 to current levels, with significant supply moving through the platform yesterday between $29 and $29.15. We've seen a very small amount change hands at an even higher price today.

The consultation on proposed ETS settings remains open until the end of February. That document sets out a proposed provisional emissions budget for 2021-2025 and an overall limit for emissions in the ETS for that same period.

As it emerged when many of us had already hightailed away for Christmas, just to recap, the key proposals in regards to price settings include the following:
- the fixed price option for compliance (calendar) 2020 liabilities has been signalled to increase to $35;
- the ultimate replacement for the FPO thereafter, known as the “cost containment reserve” or CCR, has been signalled to become available from a trigger price of $50 but with many details still yet to be determined.

Meanwhile while the scheme is set to have a total makeover and the Government will join traditional sellers but via auctions instead of through the existing secondary market. Auctions are not expected to commence properly until next year post election but some 2 million units are intended to be sold in a “pilot” auction(s) in late 2020.

While the proposals appear for the most part to be supportive to price, the availability of the FPO at $25 for surrender against calendar 2019 liabilities could logically be expected to somewhat temper demand and hence prices. Likewise, the prospect of a general election later this year will introduce new uncertainties into the equation as time goes on.

NZUs are bid to $29.15 as of writing, but with relatively thin supply on offer. If you or someone you know would be a happy seller here, please get in touch or join the offer.


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