2021 ACCUs Snapshot

ACCUs spot price sky-rocketed from $16/tCO2 to $51/tCO2 by the end of the year.

Volumes of ACCUs traded, TFS Green

This tripling in value is the result of a surge in voluntary demand in the lead up to COP26 and higher compliance enforcement to support Australian carbon projects. Having reached a high of $57.50, at the time of writing, the spot ACCU price has eased back to $56.90/tCO2.

Since early 2021, there has been a significant increase in trade volume and frequency of ACCUs transactions compared to the same month in the previous year. Based on the Clean Energy Regulator’s Quarterly Carbon Market Reports, 1.6 million ACCUs were traded across 97 transactions in Q1 2021. In Q1 2020, only 950,000 ACCUs were traded across 60 transactions.

Activity in the forward market also increased across 2021, as participants on both sides of the market took steps to hedge exposures.

In July, the market saw another milestone, with the Renewable Energy Hub brokering the market’s first ACCU options contract, a Put for 100,000 ACCUs at with a strike price of $18. This contract afforded the buyer downside protection via the right, but not the obligation to sell ACCUs at $18.

The growth in voluntary demand for carbon credits has seen buyers seeking more subjective information on the projects that they are supporting.

Savannah Burning projects were the most sought-after in 2021 since Q2 due to its indigenous co-benefit. In Q3, 54% of voluntary cancellations were for savannah burning ACCUs.

The ERF launched new projects to be sold this year: soil carbon, carbon capture and storage, biomethane, plantation forestry, and blue carbon. Some of these projects are also ones that are highly sought-after by buyers.

ACCUs issued per method type (millions), March quarter 2019 to September quarter 2021 , Clean Energy Regulator
ACCUs issued per method type (millions), March quarter 2019 to September quarter 2021 , Clean Energy Regulator
Actual and estimated demand for ACCUs (millions), 2019 to 2021, Clean Energy Regulator
Actual and estimated demand for ACCUs (millions), 2019 to 2021, Clean Energy Regulator

The supply of carbon credits is predicted to surpass the end of year target of 17m ACCUs. It is estimated that 622,000 ACCUs are on track to be surrendered by the end of 2021.

ACCUs increasingly being viewed more as an investment opportunity owing to progress in international agreements and recognition of  carbon budgets, as well as the the market’s rapid growth. Speculators and investors are purchasing more ACCUs, not just to support local projects or meet targets, but also to hold for perceived future value. These ACCUs are not retired, but rather kept to be sold at a later date in the hope that prices continue to rise.

Recent discussions surrounding Buyers Damages clauses in the ERF contracts, which allow project proponents to pay out the value of the contracts instead of delivering, have been viewed as a potential short term solution to the markets supply issues. Whilst the CER had initially been seen to be discouraging such an outcome, its possible a change in its attitude similar to that which happened with the shortfall penalty in the LGC market may be on the cards. It is also rumoured that the CER is considering allowing the restructuring of some ERF contracts from ‘fixed’ to ‘optional’ delivery, though no specifics around this have yet been made public.

Any such changes could impact the ACCU markets’ volume and price dynamics considerably, given the conditions in which the market has climbed over the last 6 months.  Whatever the case may be, it appears ACCU market liquidity will likely continue to increase in 2022 improving the markets credibility in the process.

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This 2021 ACCU’s Snapshot was powered by CORE Markets.

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