The Federal Election has been run and won, with the Australian Labor Party (ALP) confident of securing enough seats to form majority government. The wave of support for pro-climate candidates now provides a number of options for the ALP to implement its proposed improvements to the Safeguard Mechanism – triggering the greater contribution of the industrial sectors to Australia’s net zero emissions reduction target.
As flagged in our recent updates, the change of government will be supportive for the local carbon offset market, reflected in the return of positive sentiment to the ACCU spot market yesterday. In response to the election outcome, the ACCU spot price grew 18 per cent on Monday, closing at $35.50/t, up 5.50 from Friday’s close of $30/t.
Despite the market response, expectations that a change in government will “significantly increase” demand (and prices) for ACCUs are far from certain, with the local market facing a number of challenges that could impact medium-term price development. This includes the role of proposed Safeguard Mechanism Credits (SMCs) – or ‘below-baseline’ units created by facilities under the Safeguard Mechanism – with the development of low-cost industrial credits likely to soften compliance and voluntary demand for ACCU offsets.
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