Australian Carbon Credit Units Industry Insights and News – September 23 Quarter
In brief
The Clean Energy Regulator (CER) remains on track to deliver around 18 million ACCUs in 2023. Entities operating facilities covered by the new safeguard mechanism (effective Jul23) are continuing to accumulate ACCUs. The CER recently projected demand for ACCUs to increase as facilities determine how they will comply with the new safeguard rules.
ACCU spot prices temporarily fell markedly to a low of $24 early in the new financial year but recovered to around $32 by mid-August and hovered in the $29-$31 range for the balance of the quarter. Analysts suggest the early dip was the result of intermediaries (who facilitate trading between the supply and demand sides of the market) selling down their market positions.
The federal government continues the implementation of various recommendations from the Independent Review of Australian Carbon Credits (‘the Chubb review’).
CER Quarterly Carbon Market Update
The CER noted that ACCU holdings in safeguard mechanism (“SM”) associated accounts (held by entities covered by the safeguard mechanism) had increased through the quarter as expected. The more noticeable trend was for intermediaries to become more actively engaged in the market. By the end of 2Q 2023, Intermediaries had become the largest holders of ACCUs in the Australian National Registry (9.8m). This is around 35% of the total 27.6m ACCUs on the Registry. Project Proponents, in comparison, hold around 9m ACCUs.
SM facilities need to reduce net emissions by more than 200m tonnes by 2030. Entities needing ACCUs to meet reducing baseline obligations can hold ACCUs directly or through third parties and intermediaries. The role of intermediaries is expected to become more prominent as facilities covered by the safeguard mechanism prepare to meet their future obligations.
The figure below shows ACCUs issued by method type over time. In 2Q 2023, the first ACCUs under the new 2021 soil carbon method were issued to two Queensland projects. Total ACCUs issued in the first half of 2023 were lower than previous years showing the impacts of the pause in crediting under the Human Induced Regeneration (HIR) Method (included under Vegetation).
Independent Review of Australian Carbon Credits (‘the Chubb review’)
The federal government continued the implementation of recommendations from the Chubb Review. To improve ACCU scheme transparency, the CER has commenced publishing carbon estimation area data for projects on the ACCU scheme project register. The Avoided Deforestation Method has been revoked, preventing registration of new avoided deforestation projects. The next phase will include defining the ongoing role of the Commonwealth Government as a purchaser of ACCUs and delivering a new (proponent-led) process for new method development.
The Climate Change Authority (“CCA”), an Australian Government statutory agency that provides advice to government on climate change policy, has commenced a review of the legislation underpinning the ACCU Scheme focussing on:
- Securing integrity – focusing on additionality, permanence, and leakage.
- Managing supply and demand – including land use competition and supporting participation.
- Scaling emissions removals – including how the scheme can support engineered removals.
- Alignment with the Paris Agreement – including international trade considerations.
Outlook
The early signs of the impact of the Safeguard Mechanism can be expected to intensify as demand for ACCUs increases and facilities determine how they will comply with the safeguard rules. The more active engagement of intermediaries in the Australian carbon trading market can only be expected to grow as overall demand for ACCUs rises.
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