Australia's carbon credit issuances nearly match demand

Demand for Australian Carbon Credit Units (ACCUs) rose almost six-fold in the first compliance year of Australia's reformed safeguard mechanism, although total carbon unit surrenders were nearly matched by issuances of the new safeguard mechanism credits (SMCs).

A total of 138 facilities out of 219 covered under the scheme surrendered 7.05mn ACCUs and 1.38mn SMCs for the July 2023-June 2024 financial year to manage their excess emissions, up sharply from 1.22mn units a year earlier, according to data released by the Clean Energy Regulator (CER) on 15 April. But the combined 8.44mn units surrendered were nearly matched by 8.3mn of SMC issuances to 63 facilities — of which almost 7mn will be now held for future compliance, potentially weighing on market sentiment around ACCUs in the short to medium term.

The final SMC issuances for 2023-24 were below the maximum potential of 9.2mn first disclosed by the Climate Change Authority in November 2024. But that was significantly higher than initially forecast and impacted ACCU spot prices in the following months.

Some market participants had been expecting most of the SMCs to have been issued to coal miners, who benefitted from a change in the method used to estimate fugitive methane emissions, but oil and gas extraction accounted for just as many issuances as coal mining, each with around 3.07mn units, or 37pc of the total, CER data released on 15 April. Metal ore mining and processing, including ferrous, non-ferrous and precious metals, accounted for around 13pc of all issuances, followed by chemicals and other industries.

Biggest SMC issuances and surrenders

Shell has emerged as the company that received the largest number of SMCs at a facility level, with its Prelude floating LNG (FLNG) terminal issued with 1.07mn units as it reported scope 1 emissions of 1.85mn t of CO2 equivalent (CO2e) for a baseline of 2.93mn t of CO2e.

UK-South African firm Anglo American received a higher combined volume of 1.64mn SMCs, of which 1.02mn came from its Capcoal coal mine and 622,997 from its Grosvenor coal mine in Queensland. Chevron received 622,554 SMCs across its Gorgon and Wheatstone operations, while Australian independent Santos was issued 205,500 units across four facilities (see table).

Meanwhile, SMC surrenders were registered across 27 facilities. Coal miners in New South Wales (NSW) and Queensland made the bulk of these surrenders at 991,857 units, including Anglo American and Australian mining company Stanmore Resources (see table).

Net emissions fall

Baselines were reset under the reformed safeguard mechanism, which applies to facilities that emit more than 100,000t of CO2e in a compliance year across several sectors, and now face a 4.9pc/yr decline rate until 2029-30. Scope 1 emissions covered under the scheme fell from 138.7mn t of CO2e in 2022-23 to approximately 136mn t of CO2e in 2023-24, representing 31pc Australia's total emissions in that year.

Net safeguard emissions fell to 127.8mn t of CO2e from 137.9mn t of CO2e a year earlier following the surrender of ACCUs and SMCs.

The total liability in 2023-24 reached around 9.2mn t of CO2e across 142 facilities, of which around 0.8mn t CO2e remained in an excess situation on 1 April 2025, according to the CER. The 0.8mn t of CO2e is from five facilities under the operational control of three companies, two of which are in voluntary administration.

The third company, Australian independent Fitzroy, failed to manage an excess of 583,079t of CO2e for its Ironbark No. 1 and Carborough Downs Coal Mine facilities for 2023-24. It has entered an enforceable undertaking with the CER and has committed to surrender the required units, start feasibility studies to investigate carbon abatement opportunities at the two facilities, and ensure neither is in an excess emissions situation for the 2024-25 year on 1 April 2026.

By Juan Weik