The Clean Energy Regulator held the 14th Emissions Reduction Fund (ERF) Auction on 5 and 6 April 2022. 7.6 million tonnes of carbon abatement for optional delivery was contracted at an average price of $17.35.
At the auction, 25 new optional delivery ERF contracts, nominally valued at $131 million, were awarded and over 76% of the volume offered at auction was accepted. Successful bids included revegetation, soil carbon, industrial efficiency, and landfill waste gas projects.
Auction 14 saw an 11% increase in volume on the previous auction for a 2% increase in average price.
David Parker, Chair of the Clean Energy Regulator, said: “The shift to optional contracts highlights how Australia’s carbon market is evolving with increasing demand from the private sector for Australian Carbon Credit Units (ACCUs).
“We expect very few ACCUs under optional contracts to be delivered to the Commonwealth with most being sold to private buyers at higher prices available in the private voluntary market. To date, only a tiny fraction of optional contracts have been delivered to the Clean Energy Regulator. This illustrates that optional delivery contracts are not primarily a means for the government to purchase abatement but rather act to underpin supply.”
For the first time, at Auction 14, long-term, ‘fixed’ delivery contracts for the purchase of ACCUs under the ERF were not offered. Recent auctions have seen little demand for fixed delivery contracts as the market has demonstrated a clear preference for the optional contracts offered at Auction 14.
Optional delivery contracts de-risk investment in projects while facilitating liquidity in the secondary market if contract holders choose to sell their carbon credits to others.
As a result of the ERF, 217 million tonnes of abatement has been leveraged and 77 million tonnes has been delivered under contract. There are more than 1100 ERF projects across all sectors of the economy.
The ERF is a robust offsets scheme with a high degree of integrity. This derives from the fact that the ERF is established in legislation and is administered by the CER as an independent regulator with a raft of compliance tools at its disposal.
For auction results see Auction Results: April 2022.
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