Carbon Markets

ALERT: Australian CO2 spot price hits $21.50, forward activity picks up

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The spot price for Australian carbon credit units (ACCUs) continues to break new ground, reaching $21.50/t on Wednesday, a new record high, as the market continues to be buoyed by demand from large corporate emitters. RepuTex’s ACCU spot price assessment, which compiles aggregate transaction data from market participants, has now grown over 30% calendar year-to-date.

Two forward transactions were also recorded, for delivery of 10,000 ACCUs in Feb-22 at $22.30, and delivery of 10,000 ACCUs in Feb-23 at $23.30 (Jarden). Five forward transactions have now been recorded since Apr-21, for delivery between Feb-21 and Feb-23 at $18-25/t. As noted in earlier updates, settlement dates ahead of the ​28 February deadline for covered emitters to surrender ACCUs under the safeguard mechanism suggest that forward activity is attributed to compliance entities looking to protect against further spot price increases and sure up access to supply.

Forward spot activity mirrors off-market activity, which is occurring at larger volumes, as high emitting companies seek to source credits to sure up longer term supply in support of carbon neutrality goals, and their longer-term compliance risks.

Compliance demand is expected to grow over our outlook period as companies begin to true-up offsets against their multi-year baselines. This is expected to lead to an uptick in offset demand from compliance entities, with voluntary corporate demand from safeguard covered entities (and Climate Active participants) also forecast to grow.

We continue to forecast further price upside over FY21-30, particularly as investors and speculators continue to grow their holdings, and eventually use ACCUs to hedge climate risks in other asset classes (such as emissions intensive equities or energy commodities), as covered in our July Carbon Market Outlook. This could begin to see the ACCU market align with investor growth seen in markets such as the EU ETS, where speculative (long) positions have grown from 7% in Jan-18 to 33% in May-21, while long positions in the California ETS have similarly grown from 12-27% YTD.

To access our latest spot price and long-term price forecasts please login to EnergyIQ.

If you have any questions or comments, contact our Client Services team.

Kind Regards,
The RepuTex Team
Australian Electricity Markets

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