Carbon Markets

OUTLOOK: Medium-term forecast for Australian Carbon Credit Unit (ACCU) supply 2023-33

Our new Carbon Supply Outlook (CSO) for the Australian Carbon Credit Unit (ACCU) market has now been published.

This CSO presents our expectations for medium-term ACCU supply by method over a rolling 10-year horizon, providing an in-depth view of supply side development and the assumptions deployed in our quarterly Carbon Market Outlook (CMO).

Key findings include:

  • We expect the Australian market to have ample supply to meet increasing demand under the Safeguard Mechanism, with annual ACCU issuance forecast to grow 2.9x from 15.7 Million (M) in FY23 to 45 M by FY33 under our Central Case.
  • Based on today’s numbers, annual issuance of 45 M would make Australia the largest developer of carbon offsets in the world (up from fourth in 2023), ahead of the United States (37 M), China (32 M) and India (31.1 M).
  • Future supply from “new projects” will provide an important source of ACCUs over the medium-term, making up almost 70% of new supply in 2033, or 40% of total supply over the 10-year period.
  • We forecast 3 activities – Regeneration, Soil Carbon, and Plantation Forestry – to contribute 71% of total issuance by 2033 due to relatively low costs, large abatement potential, and long crediting periods.
  • This will see the market transition from low-cost “emissions avoidance” projects, which currently make up around half of total issuance, to “emissions removal” projects, which we forecast will eventually make up around 85% of supply.
  • Despite a large number of Soil Carbon registrations, smaller project sizes should lead to moderate issuances, eventually growing to around 18% of total supply as projects are developed under the new Integrated Farm and Land Management (IFLM) method.
  • We eventually expect the IFLM method to make up 42% of annual issuance, or one-quarter of supply over the next 10 years, underpinned by new HIR, EP and Soil Carbon projects (registered from August 2024).
  • We expect the “ERF exit” scheme to continue beyond its pilot phase, with some chance of “minimum delivery” requirements being implemented, however, we expect the government to accrue sufficient reserves to support its Cost Containment Mechanism via the resumption of contracting under a re-purposed ERF (targeting marginal and priority activities).

Analysis presents our Central Case forecast for medium-term ACCU supply, or in-house view of market development. This is complemented by scenario analysis which considers alternative pathways for the medium-term development of supply in response to key economic, market, and policy uncertainties.

This report is published under our Australian Carbon Intelligence service. Click below to access the report, or click here to take a tour of our EnergyIQ platform.

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