BRIEFING: What the CAC? Impact of permanent fixed delivery exit arrangements

On Wednesday, the Clean Energy Regulator (CER) announced a new permanent exit arrangement for Fixed Delivery Carbon Abatement Contracts (CACs), replacing the previous “pilot” arrangement. Under the new permanent exit arrangement, CAC holders may permanently exit their contracts if they: commit to deliver at least 25% of remaining contracted ACCUs as of 1st January 2025, after which CAC holders will be eligible for a 60% discount on subsequent exit payments; commit to fulfill all outstanding contractual obligations no later than 31st December 2030; and commit not to reschedule delivery milestones once the permanent exit arrangement has been agreed. While the new exit arrangements are beneficial for CAC holders, they do not absolve several large underperforming CACs from delivery obligations, which has plagued some large developers. In this analyst briefing, we discuss the expected market impacts of the newly announced exit arrangement.