INSIGHTS: ACCUs rise to $14 at ERF III, bullish outlook for Auction IV

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone
  • Modelling indicates the ‘highest clearing price’ for ACCUs grew to around $14 at the third ERF auction – a 40 per cent premium on the average price of abatement ($10.23) published by the Clean Energy Regulator (Regulator).
  • This reaffirms that the weighted average price ($10.23) is not representative of broader abatement value being contracted, with informed bidders continuing to extract full value by balancing risk/returns in line with ACCU supply expectations.
  • We estimate ACCU prices may push higher at ERF auction IV, with potential for lower participation and reduced competition to enable marginal participants to exert greater influence at the top end of the supply curve, pushing prices higher.
  • Higher prices are likely to be supported by secondary market activity, which may again act as a de facto floor price at ERF IV.

RepuTex today released its statistical review of the third Emissions Reduction Fund (ERF) auction, including our simulated back casting of proponent bids, our auction supply curve, and our estimated highest clearing prices, i.e. the last (or highest) point at which contracts were cut-off in line with the Regulator’s benchmark price and variable volume threshold.

The third ERF auction was held on the 27th-28th of April 2016, with 73 contracts entered into by the Regulator  for the delivery of 50,471,310 ACCUs. Approximately $516 million (M) in funding was committed (20 per cent of all ERF funding), at an average price per tonne of $10.23.

While the average price of abatement disclosed by the Regulator ($10.23) is a market reference point, in practice, it is of little help as a robust price signal in that it does not reflect the wider value of contracted emissions reductions. Nor does the average contract price reflect the current value of ACCUs – and in this way, should not be mistaken for a market-derived “carbon price”.

As shown in Figure 1, RepuTex modelling indicates the ‘highest clearing price’ for ACCUs grew to

Restricted Access

To continue reading this free post, register below.

Continue reading this article

To continue reading this free article, simply click “register now” to access our free insights & events.

Access is free, and instant! Sign up below.

Register Now

Sign up to receive our research alerts

Create a free account to access our free insights and event invitations, and receive our research alerts via email. Access is complimentary, and instant. Sign up below:

LATEST UPDATES

  • Forecast ACCU prices under the Climate Solutions Fund – High road or the low road?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In late February the Australian Government announced an additional $2 billion in funding for the […]

  • EPA Provisions – Marginal cost and availability of offsetting LNG emissions in WA

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The Western Australian Environmental Protection Authority (EPA) has released strengthened policy guidance for high emitting […]

  • WEBINAR: An Australian carbon price under Safeguard 2.0 – What, when, how much?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Dear Subscriber, Thanks for your interest in today’s webinar, discussing the current Australian carbon price, and […]

    Research Insights, Webinar | January 30th, 2019
  • Safeguard mechanism 2.0 – A carbon price under the ALP’s tighter baseline scheme

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The ALP is expected to announce a plan to tighten the government’s safeguard mechanism framework, […]

    Carbon Market Update, Research Insights | December 6th, 2018
  • Electrifying Victoria: The impact of election policy on wholesale prices

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In the absence of a robust federal energy and climate policy framework, Australian states and […]

    Carbon Market Update, Research Insights | November 16th, 2018
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone