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Australian carbon credit unit demand

19 March 2019
ERF​​

Demand for Australian carbon credit units (ACCUs) gives an indication of the likely volume and timing of ACCUs required to be supplied to the market. Emissions Reduction Fund contracts are the largest source of demand with 10.9 million ACCUs delivered in 2017–18. However, additional sources of demand are emerging.

  • Emissions Reduction Fund contracts
  • the safeguard mechanism
  • state and territory government demand, and
  • voluntary demand.

Demand for ACCUs in 2017–18 and 2018–19 (as at 1 March 2019) by source

Demand Source2017–182018–19 (to date)
Emissions Reduction Fund contracts10.92 million6.71 million
Safeguard mechanism (compliance year 2016–17)*0.38 million0.15 million
State and territory government demand0.21 million0.06 million
Voluntary demand0.14 million0.20 million

*Safeguard mechanism surrender does not include deemed surrenders.

Emissions Reduction Fund contracts

The Clean Energy Regulator has committed $2.3 billion to date through Commonwealth government contracts to purchase 193 million ACCUs. Over $200 million remains available from the Emissions Reduction Fund for future purchasing.

Of the 193 million ACCUs required under Emissions Reduction Fund contracts, 39.5 million ACCUs have been delivered to date, with 153.7 million ACCUs remaining to be delivered by 2029–30.

Demand from Emissions Reduction Fund contracts is rising each year, with the 10.9 million ACCUs delivered in 2017–18 increasing to reach 20.9 million ACCUs required in 2021–22.

Emission Reduction Fund contracts demand data

Emissions Reduction Fund contract demand data is provided in the carbon abatement contract register. The register provides information on the carbon abatement contracts awarded by the Clean Energy Regulator, the total number of ACCUs purchased by the Commonwealth each financial year, contract duration, end date, and status, and whether a contract was established with one or more conditions precedent.

Conditions precedent is a condition that must be fulfilled or waived before the obligation to deliver and purchase ACCUs under the contract comes into effect.

The below shows the deliveries made to date, and the remaining scheduled deliveries for Emissions Reduction Fund contracts. Scheduled deliveries can change over time due to early delivery of ACCUs, re-scheduled deliveries, contract terminations and new contracts.

Contract deliveries made and remaining scheduled deliveries of ACCUs

Financial yearERF contract deliveries (millions)Remaining ERF scheduled deliveries (millions)
2014-15 and 2015-168.6-
2016-17-13.3-
2017-1810.9-
2018-196.75.4
2019-20-17.6
2020-21-18.2
2021-22-20.9
2022-23-16.8
2023-24-17.5
2024-25-17.4
2025-26-17.6
2026-27-12.2
2027-28-8.3
2028-29-1.5
2029-30-0.2

Safeguard mechanism demand

The safeguard mechanism is a regulatory source of demand. There are a number of options available to responsible emitters to manage their emissions below their baseline, and comply with their obligations including applications for multi-year monitoring periods, calculated baselines and emissions intensity variations as well as sourcing and surrendering ACCUs.

Multi-year monitoring periods allow a facility to exceed its baseline in one year, as long as the net average emissions over two or three years are below the baseline. If a facility’s net average emissions still causes them to be in an excess emissions situation at the end of the multi-year monitoring period, the responsible emitter may source and surrender ACCUs as a management option. A list of all responsible emitters with multi-year monitoring periods is provided on the safeguard baselines table.

There was 100 per cent compliance for the 2016–17 and 2017–18 compliance years, meaning all facilities were are or below their baseline by the 1 March deadline. Responsible emitters from the manufacturing, mining, oil and gas and transport industry sectors chose to manage their emissions by sourcing and surrendering 379,792 1 ACCUs by 28 February 2018 and 151,307 ACCUs by 28 February 2019. A proportion of ACCUs surrendered were non-Kyoto units but the future supply of these units is constrained due to international rules.

We recommend planning how to source sufficient ACCUs, as ACCU prices will vary depending on a number of factors including the timing of purchase, the volume required and any third party contractual agreements that may be in place.

Safeguard mechanism ACCU demand by industry and state and territory (2016–17 and 2017-18)

Safeguard mechanism demand data

Safeguard demand data is provided in the 2016–17 safeguard facility emissions table and 2017–18 safeguard facility emissions table. The tables include the responsible emitter name, facility name, state/territory of operation and the volumes of ACCUs surrendered for each compliance year. This table also includes which facilities have multi-year monitoring in place. This data is published in March each year.

The safeguard baselines table includes facilities that have been issued a baseline determination under the safeguard mechanism.

Voluntary demand

Voluntary demand for ACCUs is mainly for offsetting emissions for airlines and corporate entities. These organisations may require offsets for certification under the Department of the Environment and Energy’s National Carbon Offset Scheme.

Buyers from this demand source are often interested in the co-benefits associated with the underlying projects. For example, savanna burning projects may support employment in indigenous and rural communities, and vegetation projects may have complementary biodiversity benefits.

Voluntary demand for ACCUs is increasing, rising from 25,000 ACCUs in 2014–15 to over 140,000 ACCUs in 2017–18. Approximately 200,000 ACCUs have already been cancelled in 2018–19 to date. ​

State and territory government demand

State and territory government demand for ACCUs is an emerging source of demand and is mainly to meet government commitments or policies to offset emissions. Examples include offsets for emissions associated with the operation of some desalination plants in Australia and vehicle fleet emissions. 

Buyers from this demand source are also interested in the co-benefits associated with the underlying projects and in offsets achieved within their jurisdictions.

State and territory government demand for ACCUs was over 210,000 ACCUs in 2017–18.

Voluntary and stateterritory government demand

Voluntary and state and territory government demand data

Voluntary and state and territory demand data is provided in the voluntary cancellations table. The data includes the date of transaction, the entity name and the number and type of units including non-Kyoto and Kyoto units.

​Footnotes

1 The previous market update reported 448,097 ACCUs were surrendered by responsible emitters for the 2016-17 safeguard mechanism compliance year. This includes 68,305 ACCUs that were a deemed surrender under contract by a responsible emitter with an Emissions Reduction Fund project at its facility and were not sourced on the secondary market.

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