The Australian carbon market experienced a major bull run over the course of 2021, with prices for Australian Carbon Credit Units growing 209% to $51/t at end-December, an annual average of $25/t.
In particular, the increasing number of private offtake transactions between voluntary buyers and project developers – at large volumes – strongly influenced spot prices over 2021, with developers increasingly setting aside issuance to fulfil forward contracting demand.
Prices for carbon abatement contracts remain well below the spot price, with a significant premium opening up against ACCUs traded in the spot market.
While speculation is warranted, we believe it is increasingly likely that the Clean Energy Regulator will provide project owners with optionality over their fixed delivery CACs under the ERF, enabling project developers to redirect some of their forward supply away from the Commonwealth to fulfill private sector demand.
As noted, while the spot market continues to be dominated by smaller transactions, larger transactions are being executed via direct offtake contracting between project developers and voluntary buyers.
Almost three quarters of all transactions have occurred via direct contracting, with the balance via the spot market.
Based on the estimated volume of ACCUs transacted, and annual average spot prices, the total value of the secondary market .
Instead, ACCUs are being contracted over longer forward delivery timelines as corporates look to build a pipeline of supply in response to forward regulatory and price risks .
55% of all registrations were Agriculture projects, underpinned by new soil carbon project registrations, while 30% of all registrations were for vegetation methods.
2022 shapes as key year for the Australian carbon market, with a range of events likely to impact price development.
Should the Coalition be returned, voluntary demand for ACCUs is expected to continue to be a strong influence on prices, along with compliance demand under the Safeguard Mechanism .
Once again, federal climate policy will therefore have a strong influence on the Australian market over the course of an election year.