Recently, there have been several reports in the media suggesting if the carbon price keeps dropping at the current rate, it will be zero in 100 days. We have been tracking the weekly spot price of carbon since June 2010, from both Westpac and OMF and have graphed them below. Currently the price is sitting around $8 per NZU.
NZU price since June 2010
The price of spot NZUs remained reasonably steady at the $18 to $20 mark for around a year until June 2011, when it started dropping and hasn’t really stopped. There are several reasons why this is the case, but it mainly has to do with hot air units for sale offshore, and the dumping of carbon credit reserves by European industrial companies to boost cashflow .
It is useful to compare recent events in New Zealand with the experience in Europe. In 2008, when it first started trading the EU ETS followed a similar pattern as the NZETS, as can be seen in the graph below.
EU ETS Spot price comparison
The market officially started trading in 2007, however, there was little or no trading before the commencement of Kyoto (1 Jan 2008). Once trading stated in earnest the price for an EUA launched at just above €20. It reached a high of €28.59 on the 1st of July 2008 ($58NZ), and then dropped over a 9 month period to below €10. The price then rallied to around €15 and remained constant until around July 2011. It has subsequently dropped €7.16 as at 5 December 2011.
As a commodity the price of an NZU is subject to the usual national and international market pressures.