This Scenario Analysis report accompanies our recently released quarterly Carbon Market Outlook (CMO) for June 2025, modelling alternative price pathways and sensitivities for the development of the Australian carbon market.
Our core scenarios investigate alternatives for the pace and scale of onsite decarbonisation by Safeguard Mechanism facilities – the material driver of medium-term carbon credit demand – by considering an “Accelerated Decarbonisation” timetable (Low price) or “Slow Decarbonisation” (High price) timetable on market development, in support of our Central Case “Progressive Decarbonisation” (Medium price) settings.
Additional policy and market sensitivities are also depicted, changing based on current drivers and themes relevant to supply-demand fundamentals, and price development.
With Australia’s updated Nationally Determined Contribution (NDC) and 2035 emissions target to be announced later this year, in this Scenario Analysis report we present alternative trajectories for Safeguard Mechanism baselines post-2030 and investigate preliminary effects on price development.
Specifically, we consider potential baseline decline rates compatible with a 65%, 70%, and 75% 2035 NDC, and discuss the key variables that will shape baseline decline rates, such as consideration of TEBA compensation, and future scheme coverage, including new entrants, potential new sector coverage, and the impact of facilities “dropping” out of scheme coverage.
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