Carbon Credit Units Price
Australian Carbon Credit Units (ACCUs) are a financial instrument which reduces total capital expenditure for a specific emissions reduction project. ACCUs are sold through carbon market agents. They are notionally backed by real carbon credits. However, the federal government holds the majority of these units and there is no centralised buy carbon credits market. Consequently, prices fluctuate and can be very volatile.
In July-September 2022, 8.4 million ACCUs were traded in the Australian market. This is a quadrupling of the number of units traded in this period. There are two separate price levels for ACCUs: a fixed contract price of $20 per unit, and a spot price of $50 per unit. The Federal Government is contracting most of the demand for ACCUs through the Emissions Reduction Fund. These contracts are expected to last up to ten years.
A recent Clean Energy Regulator quarterly report shows the increasing demand for ACCUs. It indicates that a significant volume of non-reported secondary market transactions are occurring. Despite the rising number of ACCU purchases, there are some concerns regarding the scheme. One of the biggest concerns is the lack of additionality.
Australian Carbon Credit Units Price
Until earlier this year, the Australian carbon market had performed well. The Clean Energy Futures Plan encouraged energy efficiency and sustainable energy investment, and a carbon price scheme was introduced to provide incentive for businesses to offset their emissions. Large electricity generators were subject to the carbon price, but the scheme did not apply to road transport or agriculture.
However, the election of a new government has resulted in increased scrutiny of the ACCUs scheme. An independent review of the system will take place over the next six months, led by former chief scientist Ian Chubb. The review will focus on low-cost abatement sources, a safeguard mechanism, and the use of international units for domestic offsetting purposes.
In the meantime, the carbon price has fallen, and the demand for low-cost abatement has soared. Previously, the price for carbon units was tied to a fixed contract with the Commonwealth. Under the former government, people could opt out of these contracts, and could sell their units to the open market.
As a consequence, a large gap opened up between the fixed price offered by the government and the price in the open market. This meant that a number of major miners and metal processors had to purchase ACCUs in order to surrender to the government. On the other hand, companies were able to enter the open market and sell their ACCUs for a higher price.
The Labor government is committed to cutting emissions by 43 percent by 2030. This will have a long-term impact on the offset market. In addition, the government has imposed a cap on the number of units that can be used for offsetting, and will begin to consider an import tariff on imported CO2 as part of its climate change policy. Although it is likely that these policies will not be implemented on 1 July, the government may consider implementing the Carbon Border Adjustment Mechanism (CBAM) model of an import tax.
