ANALYST UPDATE: Safeguard leniency to dilute ACCU demand

In our earlier Market Update, “ERF Safeguard Mechanism – Toothless Tiger…or Hidden Dragon?”, analysis indicated that approximately 85 facilities would be likely to face a compliance obligation under the proposed ERF Safeguard Scheme, derived largely from existing Metals, Coal Mining, Oil and Gas, and Transport facilities. For these firms, demand for Australian Carbon Credit Units (ACCUs) was likely to lead to the creation of a small compliance market, with ACCUs to be the marginal source of emissions reductions into the market.

Following the release of draft rules on Wednesday, new amendments to enable companies to further adjust their baselines are likely to erode compliance demand, specifically from the Coal Mining and Oil & Gas industries. With minimal compliance obligations on companies, we project emissions covered by the safeguard scheme will grow by around 20 per cent through to 2030.

This suggests a significant disconnect between emissions growth and the government’s new post-2020 emissions target, while in parallel, the delay of emissions reductions indicates that any future compliance market may be running-to-stand-still, with any compliance scheme likely to face a more acute emissions reduction slope to meet the new 2030 emissions target.

In this Update, we step through the key changes outlined by the government in its draft safeguard rules and the implications for the safeguard compliance market. We also examine the impact on national emissions through to 2030 and Australia’s post 2020 target emissions reduction trajectory.

Restricted Access

This is a subscriber report. Please login to access this content.

Not a subscriber?

To learn more about our research services for the Australian energy and emissions markets, click the button below, or email our subscriptions team.

Sign up for regular insights

LATEST UPDATES

  • 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
  • WEBINAR: Where to for Australian carbon offset prices under current policy?

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

    As the federal government considers changes to its climate policy framework, including new Safeguard Mechanism […]

    Research Insights | July 13th, 2020
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone
  • Quick Navigation

  • Electricity

    Learn more about our modelling and price outlooks for the NEM
  • Renewable Energy

    Learn more about our services for wind and solar developers
  • Carbon Market

    Learn more about our Australian carbon price and market analysis
  • Latest Insights

    View our latest articles, white papers, reports and publications