MARKET UPDATE: The ERF in Focus: “Who Dares, Wins” in 2015

In our Market Update for November, we take an in-focus look at the ERF in 2015, along with expectations for industry participation in the new scheme.

While existing CFI proponents may have an initial advantage at the beginning of the ERF, we forecast that high emitting companies will ultimately supply up to 80 per cent of all emissions reductions, with the Industrials, Energy, Materials and Property sectors well placed as new methods ramp up, specifically high electricity users.

Given that the Regulator is unlikely to disclose the benchmark price prior to the first auction, the ERF’s discriminatory price (pay-as-bid) format is likely to initially see the scheme operate akin to a “dark market”, creating uncertainty among first movers seeking to undertake price discovery and inflate their bids.

This may create an opportunity in early auction rounds, with analysis indicating that lower competition may open the door for higher contract prices in 2015-16.

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