News
12/12/25
In focus: Australia’s CAC exit fuels uncertainties
London, 12 December (Argus) — Australia's long-awaited permanent exit
arrangements for fixed delivery carbon abatement contracts (CACs) have sparked
uncertainties that are expected to linger in the market throughout at least the
first half of 2026, making it harder to forecast fundamentals and prices, market
participants have warned. Companies and landholders with active fixed delivery
contracts with the federal government — spanning nearly 300 CACs with a combined
remaining volume of around 84mn Australian carbon credit units (ACCUs) — will
have the option to exit their agreements if they meet certain conditions, the
Clean Energy Regulator (CER) announced earlier this month. They will need to
deliver at least 25pc of the outstanding volume of ACCUs under their contracts
as of 1 January 2025 to be eligible for a 60pc discount on their exit payment,
known as buyer's market damages. This would then allow them to sell the
remaining 75pc contracted volume elsewhere, potentially unlocking up to more
than 60mn ACCUs into the secondary market within the next five years. More than
80pc of the outstanding volumes are in fixed delivery CACs held by just three
carbon project developers — GreenCollar, Agriprove and Corporate Carbon Group —
according to the latest CER's CAC register data ( see table ). Part of the
remaining contracts come from dozens of landholders that work with major service
providers including Climate Friendly and Shell Australia's subsidiary Select
Carbon . Contract holders have been assessing their CACs, but some have already
identified that a few "contractual terms are quite onerous and may not be worth
the financial incentive" of the 60pc exit fee discount, a source at a developer
told Argus . And in the case of service providers like Climate Friendly,
decisions on whether to participate in the voluntary exit arrangement will be
made by each CAC holder, co-chief executive Josh Harris said. "Approximately
one-quarter of the portfolio of more than 180 land sector projects that we
provide services to have fixed delivery CACs, with around 3.2mn ACCUs remaining
to be delivered under the original delivery volumes," Harris said. "As agent,
Climate Friendly will provide information on the opportunity, and it will be our
project partner's choice whether to exit their CAC or not," he added. Clarity
not expected until later in 2026 More clarity around the total estimated volumes
and the timing of their release is not expected until at least the start of the
second half of 2026, after the CER starts to disclose information about the
uptake of the voluntary exit arrangements. Contract holders will need to submit
an expression of interest by 30 June 2026, with permanent exit arrangements
starting from 1 July 2026. They will need to deliver the minimum 25pc volume
before they can exit all remaining delivery milestones and receive the 60pc exit
fee discount. All obligations will need to be fulfilled by 31 December 2030 if
they opt in — including contract holders with CACs currently expiring beyond
that date, such as in 2031 or 2032, the CER told Argus on 12 December. Suppliers
would retain the flexibility to continue delivering more ACCUs than the 25pc
minimum and be paid contract prices averaging around A$12/t CO2 equivalent
(CO2e) if they wished so. That would be unlikely to happen, unless spot prices
in the secondary market fell sharply in the future, market participants said.
Argus ' daily price assessments for generic ACCUs averaged A$35.71/t CO2e so far
this year, ranging between A$32.50-38.65/t CO2e. Prices ended this week at
A$36.25/t CO2e . The results of the exit arrangements will be published monthly,
alongside updates to the CAC register, according to the CER. Around 13mn ACCUs
were released from fixed delivery CACs across four pilot exit windows in March
2022-December 2024 ( see table ). Mixed views The permanent CAC exit policy
gives land managers "greater certainty around any CAC obligations and offers a
clear incentive for early compliance through discounted exit fees", Harris told
Argus . The CER said it designed the permanent arrangement with "flexibility and
clarity" to encourage widespread uptake and maximise the delivery of outstanding
contracts. But while sources at developers said at first look it would be
financially beneficial for developers to opt in, several months will be required
to assess the detail of the proposal. "It's quite complicated — even the
regulator struggled to explain it to the market," a source at a developer said.
The CER carried out a closed webinar for CAC holders and service providers right
after the announcement, but several participants who attended said many were
left with more questions than answers, with specific details yet to be
clarified. And several active participants in the ACCU market complained that
they were left out of the webinar, having received no invitation. "Market-moving
information may be shared in such webinars, so the best practice would be
inviting all participants," a trader said. The new exit arrangements might also
put pressure on developers with large outstanding balances, making it harder for
them to deliver projects into the market, according to market participants. A
particularly challenging case is Agriprove, which has only five CACs awarded in
auctions in 2016 for a delivery period of 10 years, but for a combined committed
volume of 18.18mn ACCUs. The company has delivered just 3,660 units so far, with
another 3,905 units having been released through previous exit windows, which
means its outstanding balance is still 18.17mn units. Agriprove focuses on soil
carbon projects and currently has 616 registered ACCU projects — the largest for
a single developer across the scheme, making nearly 25pc of the over 2,400 of
currently valid projects. But those projects have received a combined 123,945
ACCUs, as soil carbon is a relatively recent method that is yet to lead to
higher issuances. The company did not reply to queries sent by Argus . Other
cases GreenCollar and Corporate Carbon Group, on the other hand, are among the
developers with the biggest ACCU issuances historically, having delivered
significant volumes to the CER through their CACs. Corporate Carbon had been
issued around 15mn ACCUs as of earlier this year, with forecast future issuances
of around 3mn ACCUs/yr from a mix of owned projects and offtake agreements with
other developers and partners in the industry, head of carbon trading Angus
Robertson told Argus in April. The company declined to comment on the new CAC
exit arrangements. GreenCollar claims to be the largest nature-based ACCU
developer, with a market share of over 40pc. Subsidiaries Terra Carbon and
Devine Agribusiness Carbon have received 26.8mn and 2.11mn ACCUs so far,
respectively, out of a total of 176.6mn, with the combined 28.9mn volume the
highest among all developers, just above 27.8mn ACCUs from bioenergy company LMS
Energy, which focuses on waste management methods. GreenCollar also declined to
comment. But it told Argus late last year that it expected its deliveries to
continue until the end date of the last contract, which is in 2032. "We have
always fulfilled our obligations under CACs and have at times exercised options
to pay exit fees, on occasion rescheduling some deliveries," it said back then.
Some contract dates were moved because the start dates of some projects were
later than originally anticipated, it said. The company said it never had to
purchase ACCUs in the secondary market to fulfil its delivery obligations. CAC
holders that fail to deliver their contracted volumes would need to pay the full
buyer's market damages and may face other consequences, according to the CER.
CAC exit windows ACCUs released 1st pilot exit window (4 March 2022-30 June
2022) 2.6mn 2nd pilot exit window (1 July 2022-31 December 2022) 1.7mn 3rd pilot
exit window (1 January 2023-30 June 2023) 4.1mn 4th pilot exit window (1 July
2023-31 December 2024) 4.5mn Permanent exit (1 January 2025-31 December 2030) up
to 21mn CER Biggest fixed delivery CAC holders Company Remaining deliveries
GreenCollar (Terra Carbon and Devine Agribusiness) 34,752,052 Agriprove
18,174,435 Corporate Carbon* 16,649,110 Others 14,528,153 Total 84,103,750
*includes subsidiary Paniri Ventures CER's CAC register Send comments and
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