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Opportunities in the ACCU market and ninth Emissions Reduction Fund auction called for July

19 March 2019

The Clean Energy Regulator has today released its first Statement of Opportunities for the Australian carbon credit units (ACCUs) market, and announced the next Emissions Reduction Fund auction.

The Statement of Opportunities, which comes in response to a recommendation from the Climate Change Authority, builds on and incorporates our regular ACCU market update.

The statement shows that there is growing demand for ACCUs from both the private sector to meet carbon neutrality objectives and from state governments. There is also ongoing private demand under the Safeguard mechanism.

To help meet this growing demand, the Clean Energy Regulator is announcing the ninth Emission Reduction Fund auction to be held on 24–25 July 2019.

David Parker, Chair of the Clean Energy Regulator, said we expect this auction to be of similar magnitude to recent auctions. Continuing the pattern of two small auctions a year will help develop the supply side of the carbon abatement market. Auctions stimulate the development of projects and tend to bring on more supply to meet private and state government demand.

“At the last auction we said the Clean Energy Regulator could be a foundation buyer, but doesn’t necessarily need to be the sole buyer—potential sellers could contract part of their supply to us and the remaining could be contracted to others or sold into a growing secondary market,” Mr Parker said.

The auction format and process remains unchanged from auction eight. The auction guidelines and details about the auction process is available on participating in an auction.

The Statement of Opportunities highlights the following key opportunities:

  • Demand for ACCUs from the private sector and state and territory governments is growing strongly and could double in 2018–19 from 2017–18.
    • Over 260,000 ACCUs from voluntary and state and territory government demand have been voluntarily surrendered for 2018–19 to 1 March 2019. The Clean Energy Regulator expects that an additional 260,000 to 350,000 ACCUs may be cancelled by the end of the year as these cancellations typically occur in the last quarter of the financial year.
    • Spot ACCU prices remain somewhat higher than long term Emissions Reduction Fund average weighted auction prices illustrating the opportunity to supply more ACCUs into the secondary market.
  • Over $226 million is currently available to the Clean Energy Regulator to purchase abatement at this and subsequent auctions. The Government’s Climate Solutions Fund has been announced to appropriate an additional $2 billion from 2020–21 onwards to fund auctions in that period.
  • Recent method changes, including the new savanna sequestration method, open up new sources of additional abatement.

To support the development of the carbon market, the Carbon Market Institute is working with the Clean Energy Regulator to deliver a seminar series in March 2019 to further explain and explore market opportunities.

The Clean Energy Regulator expects the ACCU market to develop further and, overtime, mature from a predominately over-the-counter market to potentially incorporate exchange traded platforms. The Clean Energy Regulator has a systems road map that incorporates this potential by allowing integration of exchange traded platforms with the Australian National Registry of Emissions Units run by the Clean Energy Regulator. The Clean Energy Regulator is open to discussions with potential market participants in this area.

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