While the Australian Carbon Credit Unit (ACCU) market has been relatively stable over the past six months, Australia’s climate policy landscape is again about to change gears.
By the end of February, Australia will submit its updated Nationally Determined Contribution (NDC) under the Paris Agreement, including a 2035 emissions target.
For Australia’s carbon market, this will guide the shape of the Safeguard Mechanism compliance scheme after 2030 – including the re-setting of emissions baseline decline rates – the key lever to drive industrial decarbonisation, and demand for ACCU offsets.
While final baseline decline rates will not be set until 2026-27, we expect Australia’s new 2035 target to immediately impact the ACCU market as policy ambition shifts sentiment, and underlying forecast market fundamentals.
This is likely to re-shape both spot and forward traded ACCU markets – just prior to the first compliance deadline under the reformed Safeguard Mechanism (31 March).
Market participants must therefore begin to understand the impact of Australia’s updated NDC on the ACCU market, including how baseline decline rates under the Safeguard Mechanism are likely to be aligned to Australia’s new 2035 target.
In this article, we take a closer look at recent modelling within our Briefing paper:
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