Australia announced today a long-awaited decision to permanently unlock millions of carbon credit units (ACCUs) from multi-year government contracts, spurring secondary market trading.
Companies with active carbon abatement contracts (CACs) with the government for a combined remaining volume of around 84mn ACCUs for fixed delivery will be able to exit their agreements if they meet certain requirements, the Clean Energy Regulator (CER) announced on 3 December.
Firms will need to deliver at least 25pc of the outstanding volume of ACCUs under their contracts as of 1 January to receive a 60pc discount on their exit payment — referred to as buyer's market damages. They would then be able to sell the remaining 75pc contracted volume in the secondary market.
Interested companies will need to submit an expression of interest by 30 June 2026, with permanent exit arrangements starting on 1 July 2026. But they would be able to deliver the minimum 25pc volume and make the exit payment with respect to the outstanding contracted volume by 31 December 2030.
"This timeframe for fulfilling obligations by 31 December 2030 considers that most fixed delivery carbon abatement contracts were entered into between 2015 and 2020 for initial durations of seven to 10 years," the CER said.
Any ACCUs that have been delivered from 1 January 2025 will contribute towards the eligibility for the discounted exit payment, the CER noted.
Uncertainties after four exit windows
The decision follows four exit windows between March 2022 and December 2024 that released around 13mn ACCUs from the CACs.
The government was for years the largest buyer of ACCUs through the CACs, which were awarded in auctions carried out by the CER in 2015-23.
The government introduced the exit window scheme in response to concerns about surging ACCU prices in late 2021 and early 2022. Spot ACCU prices collapsed in March 2022 following the announcement of the CAC exit arrangements, with the Australian Financial Markets Association (Afma) saying the action had shaken confidence in the ACCU market.
Although a decision for permanent exit arrangements for fixed delivery CACs had been widely expected, there were uncertainties about the timeframe and terms of the changes.
Under the fourth exit window, for instance, sellers had to deliver at least 20pc of the volume scheduled between July 2023 and 31 December 2024 and pay an exit fee to be released of the remaining volume under that period.
All ACCUs delivered to the CER under the CACs since January 2023 have been held in the cost containment reserve, which can only be accessed by facilities under the safeguard mechanism at fixed prices that rise each year, starting at A$75/t CO2e for the 2023-24 year and at A$82.68/t CO2e for 2025-26 — levels not expected to be recorded in the secondary market within the next few years.
Market participants had mixed views on the effects of the permanent exit arrangement, with some seeing it as bearish for prices as it mitigates uncertainties and confirms expectations that millions of ACCUs could be released. Others, however, expressed doubts on whether some sellers will be able to deliver 25pc of their outstanding contracted volumes until 2030.
Trading prices for spot generic ACCUs started the day at A$35.75/t CO2e and reached as low as A$35.50/t CO2e, before rising following the announcement. Generic no avoided deforestation (No AD) ACCUs traded as high as A$36.30/t CO2e early in the afternoon, but prices fell back again.
Argus assessed generic ACCU prices at A$35.55/t CO2e on 3 December, down by A$0.35/t CO2e on the day, while generic (No AD) prices were assessed at A$35.65/t CO2e, with more than 230,000t CO2e across around 20 spot transactions having been verified by the end of the day. This compares with 31 spot deals for 340,000t CO2e the whole of last week.
