NZUs climbing on the back of the CCC report; what will happen in auctions ahead?

Posted: 16 Jun 2021

This week so far NZUs have continued their journey north, last trade $40.75.

Volumes are fairly modest - certainly many compliance buyers have an eye to next week's auction, wondering if it will again bring the opportunity to secure a "deal".  That hasn't stopped buyers snapping up NZUs and since the release of the Climate Change Commission's report, prices have pushed up from $39.00 to $40.75. But thin supply is a contributing factor - natural sellers still have an eye on the horizon and perceived upside, buoyed by talk of much higher carbon prices required to drive abatement, and also supported by strong if not record log prices. 

Meanwhile funding costs remain low. And as carbon prices move up, some sellers then require less volume to be sold in order to make financial budgets.Others point to European carbon prices, still close to $90 NZD equivalent, a notable value gap even in the absence of fungibility. 

So what will happen in next week's auctions?  Read our article for thoughts.