Carbon Markets

ALERT: Rollercoaster ride as market responds to continued scrutiny of Regeneration integrity

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Our latest Carbon Weekly report has now been published, reviewing activity in the Australian and international carbon markets for the period 25-28 Apr 2024.

The Australian carbon market reacted to a new report questioning the integrity of Human Induced Regeneration (HIR) activities yesterday, with prices for HIR ACCUs trading down 3.75 from $35.75 to a daily low of $32.00/t, before closing the day at $34.00/t. Generic ACCUs fell 1.25 to a daily low of $32.50, before climbing back to $33.75 on close. Over 330,000 units were traded on the day, with over 950,000 units traded week-to-date, a 14-month high.

Reports in the Guardian and ABC referenced a new study by Andrew Macintosh and 10 other academics (published in the Nature journal Communications Earth & Environment), that analysed 182 projects in arid and semi-desert areas in Queensland, New South Wales and Western Australia, which found that regeneration in project areas largely mirrored changes in nearby areas, suggesting that changes in grazing management have had little affect on vegetation growth.

While the findings align with past literature on the same topic (from the same authors), initially addressed by the Chubb Review, notably, the new report comes amidst recent changes put forward by DCCEEW to narrow the scope of the new Integrated Farm and Land Management (IFLM) method, reported by RepuTex, that would have restricted the development of regeneration projects in arid and semi arid areas. These areas are the focus of the new Macintosh study – where rainfall can often be the larger driver of regeneration than changes in grazing management.

Following pushback from project developers, the Government softened its position on the new IFLM method, indicating it is open to allowing new regeneration projects in these areas, subject to evidence on the link between grazing management and regeneration.

As we have flagged in our recent updates, irrespective of what method is ultimately adopted to encompass future regeneration projects, the key watch for market participants is 1) the scope of allowed grazing management activities across different regions; and 2), and how audit processes may be (further) tightened for new – and existing – HIR projects, particularly in these arid and semi-arid areas.

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