As we flagged in our latest CMO (September 2024), while the Australian carbon market is fundamentally well supplied, the timing and availability of issuance remains a key sensitivity, with the market increasingly vulnerable to supply side constraints.
In particular, resourcing/administrative constraints continue to impact the market, with issuance processing delays over CY24 now estimated to have grown into a significant ACCU shortfall, creating increasing tightness. Combined with the government’s new 20% minimum delivery rule for fixed CAC holders, this has contributed to volatility in prices as compliance buyers come to market.
As noted in our recent CMO, within a finely balanced market, mounting supply-side headwinds are of increasing concern, and will continue to shape near-term market pricing, in line with our forecasts. In this update, we model the quantitative impacts of issuance delays over 2024 and discuss supply side headwinds and related market impacts, including recent speculation over the potential role of ‘phantom CACs’.
