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The Carbon Market

Prices of most units in Europe continue their positive price trend with secondary CERs trading at around €16. Issuance of primary CERs is in a downward trend as the "low hanging fruit" of low-cost mitigation projects around the world reduces.

A combination of reducing issuance of primary CERs, tentative signs of economic growth in Europe and a firming oil price (especially in Euro terms) is likely behind this firming trend in carbon compliance units.

Trade in AAUs is far from transparent although market commentators are reporting some activity. Carbon Monitor recently reported Austria purchasing 1.4 million AAUs from Estonia. The reported price equated to €9.28/unit or NZD 16.57/unit at an exchange rate of 0.56. The integrity of these "hot air" units is questioned by many countries, and not recognised by the European Union Emission Trading Scheme, and arguably are not admissible in the NZ ETS. However, this price puts downward pressure on prices for New Zealand forest AAUs (converted from NZUs).

The New Zealand market is still very subdued with NZU prices recently falling to around $18/unit. Nigel Brunel of OM Financial made this comment in Point Carbon recently: "Some sellers want to cash in now, fearing the scheme will be called off, while the emitters are just sitting on their hands."

Despite the Australian government delaying the carbon pollution reduction scheme (CPRS) until 2013, New Zealand has remained steadfast on its plan to bring the energy producers, manufacturers and transport sectors into the NZ ETS on 1 July 2010, albeit at only partial rates of liability. It would appear increasingly unlikely that there will be a back down now. It is expected that once these emitters enter the ETS and have to start accounting for their carbon emissions that demand for (forest generated) NZUs will increase.