The Australian carbon market and COVID-19

The Clean Energy Regulator is aware of calls from some stakeholders for an additional Commonwealth government purchasing event to support the Australian carbon market in the wake of the COVID-19 pandemic.

The Clean Energy Regulator has carefully considered whether there is a need for additional support before the next auction in September and is inclined to the view there is not a compelling case to intervene at this time.

The Clean Energy Regulator will announce dates for the September auction shortly.

While international carbon markets have experienced falls in pricing in response to COVID-19, the Australian market operates very differently because the Government is the dominant purchaser.

Spot prices in Australia appear to be holding up with the last three publicly reported trades for immediate delivery occurring at prices of $16.50, $15.95 and $15.90.

Source: CommTrade

The Clean Energy Regulator has not seen evidence of a material decline in demand for carbon units to date. This may be because many market participants have long-term contracts to supply units with the Commonwealth or third-parties that are generally resilient to shorter-term economic shocks.

The Clean Energy Regulator will continue to monitor developments in the market closely and if the need arises, stands ready to hold an additional purchasing event based on the average price paid at the last auction ($16.14 per tonne of abatement).

Project proponents are also encouraged to contact the Clean Energy Regulator if they would like to deliver Australian carbon credit units (ACCUs) early against future contract milestones. This flexibility to deliver early using abatement generated by the contract holder or sourced elsewhere from the secondary market can also provide valuable cash-flow to the industry at this time and provide support to the market.

The Clean Energy Regulator is interested in feedback from scheme participants on these matters. If you would like to discuss the impacts of COVID-19 on the carbon market or other related matters, please contact the agency at: ERF-Contracts@cleanenergyregulator.gov.au.