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The Australian carbon credit unit (ACCU) market is seeing a shift with regulatory compliance emerging as the primary source of unit cancellation, according to the Clean Energy Regulator’s (CER) latest Quarterly Carbon Market Report (QCMR).

One million of the 1.2 million ACCUs cancelled in the first quarter of 2024 were for compliance purposes, with the balance used to meet voluntary commitments. This includes 0.9 million ACCUs surrendered for 2022-23 Safeguard compliance, ahead of the reformed Safeguard Mechanism commencing for the 2023-24 compliance year.

CER Chair David Parker said Safeguard entities continue to accumulate ACCUs for use against future regulatory obligations, as there is a significant lead time to invest in low carbon technology and replace capital stock to reduce carbon emissions at source at large facilities. 

‘At the end of Q1 2024, ACCU holdings in Safeguard and Safeguard related accounts totalled 19.6 million, half (51%) of total holdings,’ Mr Parker said.

Despite accumulation of ACCUs by Safeguard entities, the ACCU generic spot price remained around $34 in the quarter. New supply for 2024 remains on track for at least 20 million ACCUs to be issued.

‘Continuing the higher levels of new investment seen towards the end of 2023, 0.72 GW of large-scale renewable capacity reached a final investment decision in Q1 2024,’ Mr Parker said.  ‘That has increased to 1.1 GW since the end of March and the Capacity Investment Scheme auctions should drive that higher during the year.’ 

In Q1 2024, 13.8 million large-scale generation certificates (LGCs) were validated—a strong start to the expected supply of 52 to 54 million LGCs in 2024. The latter represents an expected generation from large-scale renewables of 52 to 54 terawatt hours (TWh) for 2024, well above the statutory Large-scale Renewable Energy Target of 33 TWh. 

LGC holdings also increased, to 21.1 million, with 46% of LGC holdings likely for future voluntary cancellation to prove the use of renewable energy. This accumulation is in part due to some Australian corporations preparing to meet their commitments of 100% renewable energy by 2025.

This latest QCMR also shows sustained high levels of rooftop solar deployment by Australian households and small businesses. In Q1 2024, 0.64 gigawatts (GW) of rooftop solar capacity was installed, which is trending to a similar level installed in 2023 of about 3.1 GW for 2024.

For more detail, read the latest Quarterly Carbon Market Report.

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