As the Australian emissions market awakens for 2015, supply of Australian Carbon Credits (ACCUs) continues to remain strong off the back of compliance demand under the Carbon Price Mechanism. Over 11.8 million ACCUs have now been issued (as of January 6, 2014), with an additional 1.2 million credits injected into the market over the December reporting period, driven by the approval of 14 new projects, up from 7 last month.
While ACCU supply continues to grow as proponents chase higher offset prices under the former compliance market, the Government has released an amended form of the Carbon Abatement Contract, making allowance for ACCUs that are not acquired by compliance entities under the CPM to remain in the market following the conclusion of the CPM by being used to satisfy the delivery obligations of any successful bidder at an ERF auction.
As a result, while almost all FY15 ACCUs, and the remaining stock of FY14 credits, are forecast to be absorbed by compliance demand for offsets from liable entities under the CPM, an overhang of ACCUs is expected to fall into limbo – unable to find a compliance buyer at an attractive price under the CPM, instead facing the uncertainty of potentially low prices of the ERF auctions or secondary market.
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