Carbon Markets

UPDATE: ERF Auction 14 results and issuance update

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The Clean Energy Regulator has released the contracting details of the 14th ERF auction, with 7.6 million ACCUs contracted at an average price of $17.35/t, a 2.5% increase on Auction 13. 25 carbon abatement contracts (CACs) were awarded to revegetation, soil carbon, industrial efficiency, and landfill waste gas projects, valued at $131 million. AI Carbon again dominated the latest auction, receiving 11 CACs for delivery of over 4.7 million ACCUs, or 62% of contracted ACCUs. Other notable projects include Orica’s Yarwun Nitrates Decarbonisation Project near Gladstone.

Few ACCUs issued under optional delivery CACs are expected to be delivered to the Commonwealth, with most ACCUs likely to be withheld and sold to private buyers in the voluntary market, provided that the prevailing market price remains higher than the price of optional delivery ACCUs contracted

As noted in our earlier update, 76% of the volume offered at Auction 14 was accepted, indicating that the Regulator continues to use its discretion to limit larger price increases under the scheme. By limiting CACs to well below private market prices, the Regulator therefore continues to restrict the underwriting of higher-value abatement projects. Instead, by selecting the lowest bids, the Regulator continues to entrench a systematic skew toward lower-quality projects that are more likely to represent non-additional abatement.

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