PRICE REPORT: ACCU contracting heats up as local offset prices rise

In Short:

• The spot price of Australian Carbon Credit Units (ACCUs) grew 0.8% to $18.60/t over the past week, a new record high, with prices up 12.8% year to date.
• Forward contracting (over 1-10 years) has surged, with forward prices now well beyond current spot prices amid an uptick in off-market contracting. The high forward price environment reflects forecast price increases over the term of contracts, thin supply, and higher bids from corporate buyers, with elevated contract prices still representing value relative to more ambitious net-zero forward curves.
• ACCUs continue to make up a small proportion of immediate voluntary cancellations, with 292,451 cancelled calendar year-to-date (4.6% of total) versus over 5.9 million CERs (95.4%). Over 3m CERs have been cancelled in the last month, with CY21 CER cancellations already 20% higher than total CY20 cancellations as companies favour low-priced offsets for their near-term carbon neutrality goals.
• The Clean Energy Regulator issued 287,117 ACCUs over the past week, bringing total issuance to 95.5 million, the majority of which is to be delivered under fixed delivery contracts to the Emissions Reduction Fund.

In this Market Insider we discuss the latest offset price dynamics in Australia, including spot