The Clean Energy Regulator held the tenth Emissions Reduction Fund (ERF) auction on 25–26 March 2020, purchasing 1.71 million tonnes of carbon abatement at an average price of $16.14 per tonne, for a total commitment of $27.6 million.
David Parker, Chair of the Clean Energy Regulator, said Auction 10 was held amidst the uncertainty of the COVID-19 pandemic. Even so, Auction 10 saw a considerable uptick in interest from market participants.
“The volume purchased at this auction was considerably higher than the previous auction and highlights the important role the Government plays in underpinning investment in the carbon market,” Mr Parker said.
The average price paid at the auction, of $16.14 per tonne, is an increase on past pricing and allowed twelve contracts to be secured with a variety of abatement activities.
The Clean Energy Regulator did not accept a number of higher priced bids.
“The message remains that you need to bid competitively to be successful in a competitive market,” Mr Parker said.
There was a significant volume of bids into the auction and even if projects were not successful in obtaining a Government contract they can still be credited with Australian carbon credit units (ACCUs) for the abatement they realise. In other words, a project doesn’t need a Government contract to proceed because there are other buyers of the credits.
For the first time at Auction 10, the Clean Energy Regulator offered a new optional delivery contract on a pilot basis. These optional delivery contracts give sellers the security of a contracted price for ACCUs in order to invest in a new carbon abatement project. The seller can then choose whether to deliver abatement to the Commonwealth at the contracted price, or sell some or all of their ACCUs elsewhere.
“I am really pleased with how the optional delivery contract pilot went—we will have a good look at the results and use learning from the pilot to chart where we go from here,” Mr Parker said.
“Although we don’t expect that all abatement contracted under the optional delivery contracts will be bought by us in the end, it doesn’t matter who purchases the credits—all the abatement contributes to Australia’s emissions reduction targets.”
The Clean Energy Regulator also offered fixed delivery contracts at Auction 10.
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