OUTLOOK: Long-term Australian carbon price, supply and demand outlook

The Australian carbon market has experienced a major bull run over the course of calendar year 2021 (CY21), with prices for Australian Carbon Credit Units (ACCUs) growing over 180% to $47/t, underpinned by a surge in voluntary pledges from high emitting companies and a growing investor push to net zero emissions.

Increasing voluntary demand has led to a significant uptick in direct offtake contracting with project developers (quantities of 100,000-2,000,000 ACCUs for spot and forward delivery) as larger buyers head straight to the source rather than navigate the opaque and illiquid OTC market. This influx of demand has created a tight supply setting across the market, driving prices higher, supported by bullish sentiment attributed to Australia’s net-zero emissions reduction target.

The surge in corporate voluntary buyers has triggered a structural change in demand that is unlikely to be met by short-term supply. This suggests a sustained period of higher prices may be on the horizon, even in the absence of robust federal policy. As companies pursue a net-zero decarbonisation pathway we believe a carbon “supercycle” is therefore inevitable, with corporate demand to outpace supply, driven by a raft of new voluntary net-zero pledges, which continue to be adopted in step