Carbon Match Market Update

Wednesday 16 Jun 2021

Final Advice Out, NZUs Break Through $40 - The Climate Change Commission's final advice was tabled in parliament and made public recently. This time, the Commission has set out three different broad pathways showing that achieving their recommended budgets is possible - budgets which cover the next 4, 9 and 14 years.

Getting through what is a 400 page rework of the draft advice will take time. And on first blush the budgets recommended appear to be slightly more generous than those initially consulted on.

Is that a back peddling, a lessened ambition? The realpolitik of those real world constraints? We think of it rather as a pragmatic flattening of the front end - a nod to the fact that the success of this entire gargantuan exercise continues to rest on public support, and on striking some kind of balance between getting moving, but not with such a jerk that folks fall off the bus.

The NZU price reaction so far has been positive. This is a milestone event for a ten year old carbon market. The PM has confirmed the intention of the Government to respond with an emissions reduction plan by year end. Minister Shaw has reiterated that every part of the Government will need to come to the table and commit to urgent action to bring down emissions in their sector. Moreover work is underway to increase our NDC.

At the ETS level, the Commission has reiterated its recommendations on raising ETS settings at the earliest opportunity such that auctions deliver a much higher price corridor. Our understanding is that this work is expected to be finalised over the course of the next few months such that regulations can be passed and new settings can be in place for 1 Jan 2022.

There's far more to digest and weigh up in the coming days, but this is where we are right now.

As we continue to read through the report, along with the rest of you, NZUs have rallied, trading up from $39.20 to bust through $40 for the first time ever.

As of writing this, our last trade was $40.10, best bid $39.80, with a little bit offered for the taking at $40.00.

Source: Carbon Match from 10am - 5pm every weekday.

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