International carbon prices have tumbled amid fears that a COVID-19 induced economic downturn will curb industry demand for carbon allowances, causing a heavy sell-off by investors. In Europe, EUA prices fell over 11 per cent last week, referred to as Black Monday, reaching a low of €15.24/t (A$28), down from €29.94/t (A$54) in mid-July 2019.
Locally, the Australian Carbon Credit Unit (ACCU) spot price has continued to trade between $16.50-17/t since late-February, at low volumes, down from a four-year high of $17.50 in December-19. We view the local ACCU market as largely inoculated from the economic consequences of COVID-19, with reduced industrial output unlikely to translate into lower demand for carbon offsets given the current design of the Commonwealth’s Safeguard Mechanism.
