INSIGHTS: When will demand peak in Australia’s carbon market?

With the 2026-27 Safeguard Mechanism review commencing next month, attention is increasingly turning to the future direction of Australia’s carbon market.

Questions around emissions baseline decline rates, the timing and scale of new ACCU supply, and the uptake of onsite decarbonisation will continue to dominate the debate as policymakers assess whether the Safeguard Mechanism is delivering its intended outcome – driving industrial abatement to support Australia’s emissions reduction target.

At its core, the upcoming policy review centres on the timing of onsite emissions reductions and carbon credit use, and how the abatement balance will evolve over time. This raises a key question: When will onsite action accelerate – and when will offset demand peak in Australia’s carbon market?

In this Insights article, we examine what our latest long-term outlook suggests for compliance demand in Australia’s carbon market – and when we are expected to reach peak demand – including what this reveals about the pace of industrial decarbonisation under the Safeguard Mechanism.

Compliance demand growth is only just beginning

Despite recent focus on the use of ACCUs to support short-term compliance activity, Australia’s carbon market remains in the early stages of development.

We continue to expect carbon units to play