Carbon Markets

ALERT: “ERF exit” triggers 24% price drop as uncertainty weighs

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The spot price for Australian Carbon Credit Units (ACCUs) has fallen 24% (11.35) to $35.40/t – down from a close of $46.75/t on Thursday – as uncertainty weighs on the market in response to the federal government’s announcement to unlock the forward supply of ACCUs contracted under the Emissions Reduction Fund.

As noted in our earlier update, up to 6.7 million ‘new’ ACCUs may now become available in FY22, or up to 112 million by 2030. If new supply is not balanced by a commensurate volume of new demand – as is the case here – downward pressure on prices may be significant, with downside limited to a price floor of $24/t in line with average ERF contract prices and buyers market damages. Such a level is likely to be tempered by the continued development of voluntary demand, and the low incentive for sellers to exit their ERF contracts below $25/t, with prices in the mid $30s-40s more likely to encourage sellers to hit the open market.

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