Carbon Markets

Introduction of 20% minimum delivery rule for CAC exits as government strenghtens cost containment measure

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The Australian Government has adopted a proposed amendment to ‘fixed delivery’ exit arrangements under the ACCU Scheme (formerly the Emissions Reduction Fund), requiring holders of fixed delivery Carbon Abatement Contracts (CACs) to deliver 20 per cent of the ACCUs due for delivery during an exit window to be eligible to exit the remaining percentage.

The ‘minimum delivery’ rule was initially proposed in August 2023 in the ACCU Review Implementation Discussion Paper as a means to ensure sufficient reserves of ACCUs would be available to support the operation of the Safeguard Mechanism’s cost containment measure (CCM). Under the CCM, Safeguard facilities that exceed their baseline will be able to access a government reserve of ACCUs at a fixed price of $75/t in 2023-24, increasing with Consumer Price Index (CPI) plus 2 per cent each year, providing certainty on the maximum annual compliance costs facilities may face.

As we flagged in our latest Carbon Supply Outlook (CSO), the ACCUs available for use under the CCM were to be sourced from ACCUs delivered to government from 12 January 2023 onwards under carbon abatement contracts. We estimate around

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