Carbon markets: ACCU prices start to rally with safeguard mechanism certainty

Eric Barker, 05/04/2023

THE market for Australian Carbon Credit Units has had a positive response to the finalisation of the Federal Government’s amendments to the safeguard mechanism – with prices rising and higher volumes traded.

According to Jarden, the spot price for ACCUs closed yesterday at $39 – which is slightly more than its last peak after the Chubb-review was handed down in January. Market information service Reputex Energy says in its weekly email that traded volumes had increased significantly.

“The market re-awakened after a slow fortnight leading up the final vote,” the email said.

“The majority of the gains in value (and traded volumes) were seen in the Generic basket, with initial uncertainty seeing the Generic-HIR spread tighten over the week.” (More on the different values of ACCUs here)

The amendments to the safeguard mechanism has been one the flagship climate policies for the Albanese Government, who is hinging on it to meet its target of reducing emissions by 43pc by 2030.

Originally implemented by the Abbott-Government, the Safeguard Mechanism sets a emissions baseline for large emitters and requires them to offset when they exceed it.

The fundamental change Labor has made, has been a yearly decline in baselines and creating “safeguard credits”, which are awarded to companies who emit less than their baselines. A deal with the Greens to get the bill across the line has meant companies will need to do more to justify purchases of ACCUs.

Slow period for the carbon industry

The uncertainty created by the political changes has slowed the carbon industry over the past six months – who were awaiting the outcome of the Chubb-review and the safeguard mechanism outcome.

Implementing the findings of the Chubb-review is another hurdle, but the overall direction from the government is a move towards some reliance on carbon markets. Reputex says the overall trend in volumes has started to increase.

“Over 5 million units were traded in the brokerd markets over Q1 2023 – 3 times the previous quarter and 5 times the same quarter last year,” its state of the carbon market email says.

Traded volumes in March were down MoM, but were 40pc above our rolling FY23 monthly average, indicating increasing liquidity in the market, driven by strong demand for Generic ACCUs from speculative and liquidity providers ahead of future compliance demand.”

  • To track the ACCU price, keep an eye on Beef Central’s industry dashboard



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