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

The price of Australian Carbon Credit Units (ACCUs) climbed back above $16/t in early September, trading in a narrow band of $16.10-20/t through October. Prices remain well below the 12-month high of $17.50/t recorded in December 2019. The spot price is again trading at a premium to the ERF average price of $15.74/t, following a decrease in the ERF average price (from $16.14/t) at the 11th ERF auction held in September.

Despite an increase in contracting at the 11th ERF auction, with abatement volumes growing to 7 million (up from 1.7 million at Auction 10), the scheme continues to contract at low volumes, with the last six events failing to contract above 10 million ACCUs, for an average of just 2.9 million over the last three auctions.

As we have noted in earlier updates, this slowdown is primarily attributed to the low price environment and the voluntary nature of the scheme. While early auction rounds contracted many existing projects (transitioning from the former Carbon Farming Initiative), modest price increases in later rounds have failed to incentivise the participation of higher cost abatement activities.

Should the Clean Energy Regulator ease restrictions on the participation of higher cost abatement, allowing contract prices to rise above $20/t, the handbrake on ERF contracting could be released, with a higher price environment potentially incentivising more widespread participation. However, based on recent history, we continue to view the ERF as a complimentary policy lever rather than the primary driver of large-scale GHG emissions abatement through to 2030, with any significant turnaround in market sentiment and contracting volumes unlikely.

In this outlook, we provide updated analysis of activity in the ERF and carbon spot market, including our long term carbon price, supply, and demand forecasts to 2030, and our alternative 1.5-2 degree ACCU price pathways under the Paris Agreement.

Restricted Access

This is a subscriber report. Please login to access this content.

Not a subscriber?

To learn more about our research services for the Australian energy and emissions markets, click the button below, or email our subscriptions team.

Sign up for regular insights

LATEST UPDATES

  • ‘Tsunami’ of renewables to keep electricity prices low, but headwinds grow for gas

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In our latest Australian Electricity Outlook (AEO) for the National Electricity Market (NEM), published on […]

    Research Insights | April 30th, 2021
  • OUTLOOK: NEM wholesale electricity and LGC price forecast 2021-40

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Dear Subscriber, Our latest Australian Electricity Outlook (AEO) for the National Electricity Market (NEM) has […]

    Research Insights | April 29th, 2021
  • The Safeguard Mechanism: Australia’s Toothless Tiger… or Sleeping Dragon?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Covered emissions and baselines The Safeguard Mechanism covers large industrial facilities with direct emissions of […]

    Research Insights | April 21st, 2021
  • RECORDING: Scenarios for ACCU offset prices by 2030 under net-zero emissions

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In this event, we discuss the outcomes of our latest quarterly outlook for Australian Carbon […]

    Research Insights, Webinars | April 19th, 2021
  • What impact will a net-zero emissions target have on forecast ACCU prices?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The Australian carbon market is undergoing a “fundamental repricing” on the prospect of a national […]

    Research Insights | April 7th, 2021
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone