Carbon Markets

UPDATE: Carbon Offset Market Report – Spotlight on tax status of ERF exit fees, and emerging ACCU spot price premiums

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While the ACCU market remains flat ahead of the federal election, a recent increase in swap transactions indicates the early stages of a ‘flight to quality’ offsets may be developing in Australia, with a premium being placed on projects of higher environmental integrity in response to demand from voluntary buyers, and the threat of regulatory risk associated with some project types. This trend is well established in the international voluntary market, where nature-based removal and sequestration activities currently trade at a significant premium over lower-quality industrial avoidance projects. While the local market awaits the expected release of fixed delivery supply under the ERF (delayed by major administrative bottlenecks and uncertainty over benefits sharing determinations), questions continue to abound over the tax status of ACCU exit fees, with the deductibility of any potential penalty (versus an expense) having notable implications for the ACCU “floor price” required to incentivise project developers to release their offsets to the secondary market. We take a closer look at these price dynamics in today’s update.

This report analyses current activity in the Australian and international voluntary carbon markets, including spot and forward price dynamics, offset issuance and voluntary cancellations. Analysis considers Australian Carbon Credit Units (ACCUs) and voluntary offsets across key international registries including Verra, Gold Standard, the American Carbon Registry, and the Climate Action Reserve.

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