ACCU contract prices rise, but Regulator takes the low road at ERF Auction 10

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

The 10th Emissions Reduction Fund (ERF) auction purchased 1.7 million Australian Carbon Credit Units (ACCUs) at an average price of $16.14/t, an increase from record low levels of abatement contracted at Auction 9 (59,000 ACCUs) in July 2019.

While volumes have increased, contracting remains well below earlier auction rounds, with Auctions 1-4 purchasing an average of 44 million ACCUs. The last three ERF auctions have contracted an average of 1.6 million ACCUs, reflecting lower participation across the market due to the administrative complexity of the scheme and a low price environment. The Clean Energy Regulator remains unwilling to contract at higher prices, not accepting a number of higher priced bids at Auction 10.

As noted in our earlier update, the unwillingness of the Regulator to contract at higher prices has effectively collapsed the ERF market, with the low price ceiling failing to unlock higher cost abatement projects, while eroding market sentiment as bidders sit on the sidelines or wait for more favourable prices in the secondary market or via direct offtake agreements.

Should the low price environment continue under the second phase of the ERF/Carbon Solutions Fund scheme, modelling indicates that abatement contracting is likely to remain at low volumes (under 3 million ACCUs), with low average prices continuing to constrain the participation of abatement projects slightly higher up Australia’s abatement cost curve – particularly land sector activities like soil carbon and plantation forestry, as well as industrial projects such as source separated organics, commercial buildings, and wastewater.

At these contracting volumes, the ERF is unlikely to make a large contribution to Australia’s national emissions reduction abatement task, with a re-working of the scheme needed to better incentive industry participation. Just 190,381 ACCUs were surrendered by large emitting companies under the safeguard mechanism over FY18-19 (1.3% of covered emissions), with industry emissions continuing to increase in line with our earlier outlook for Q3 FY19-20.

Kind Regards
The RepuTex Team
Australian Energy Markets

LATEST UPDATES

  • Aligning Australian industry with net-zero emissions under the Paris Agreement

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

    While the government continues to reject calls for a net-zero emissions target, policymakers are unlikely […]

    Research Insights | October 27th, 2020
  • Could LGCs boost carbon offset liquidity, and support renewable energy investment?

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

    The Large-scale Renewable Energy Target (LRET) requires liable entities to meet their compliance obligations by […]

    Insights, Research Insights | October 13th, 2020
  • WEBINAR: Wholesale electricity price forecast for the National Electricity Market

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

    In this event, we discuss the outcomes of our latest quarterly Australian Electricity Outlook (AEO) […]

    Research Insights, Webinars | September 14th, 2020
  • Perfect storm drives down NEM wholesale electricity prices, but “the only way is up”?

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

    In this update, we discuss our expectations for wholesale prices in the National Electricity Market […]

    Research Insights | August 25th, 2020
  • OUTLOOK: NEM wholesale electricity and LGC price forecast 2020-40 (Q4 FY20)

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

    Dear Subscriber, Our latest Australian Electricity Outlook (AEO) for medium- and long-term price development in […]

    Outlook, Research Insights | August 21st, 2020
  • Download this free report

    To start your free download, simply fill in the below form. You will also receive our future updates, event invitations, and research insights by email.
    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone