Due to changes allowing the longer duration of carbon abatement contract periods, we anticipate amendments to the allocation of ERF funding at next week’s Federal Budget, with expenditure forecast to decrease despite the Regulator contracting more abatement than initially expected by the market. With more than one quarter of the ERF budget committed following the first auction, we project that the $2.55bn ERF budget will be fully exhausted by 2016, leading to considerable investment uncertainty and the risk of market collapse. In this report, we update our expectations for medium-term ERF expenditure and contracting – and the approaching demand shortfall – with implications for industry and carbon farming participants.
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