Our latest Carbon Market Outlook (CMO) for the Australian carbon market has now been published. This quarterly CMO presents our detailed modelling and expectations for Australian Carbon Credit Unit (ACCU) and Safeguard Mechanism Credit (SMC) prices over a 10-year horizon to 2035, and underlying supply-demand fundamentals.
Following the announcement of Australia’s new Nationally Determined Contribution (NDC), in this CMO we consider the impact of the government’s 62-70% target by 2035, including preliminary impacts on the Safeguard Mechanism scheme.
At the lower end of the target range, we assume policy ambition does not backslide. Accordingly, we maintain our previous 4.9% baseline decline rate assumption for 2031-35. Australia’s minimum emissions target does therefore not alter our outlook, with effects already embedded into our central case trajectory.
Despite this, Australia will still need to materially accelerate its annual emissions reductions to meet its 2035 commitments. With limited further gains possible in the Electricity sector, and remaining uncovered sectors (Agriculture, Built Environment, Transport) hard to decarbonise and/or regulate, industrial sectors covered by the Safeguard Mechanism may be required to contribute more to meet the new target, given least-cost abatement may be sourced from other sectors.
This will be a key watch at the upcoming
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