Platts ACCU prices jump to over seven-month highs on Safeguard demand, impending stringent policies

Platts Australian carbon credit unit prices touched more-than-seven-month highs across the liquid segment of the market due to increased Safeguard demand ahead of expected tighter compliance policies.

The liquid segment of the market comprises Generic ACCU, Generic ACCU without avoided deforestation and ACCU Human-Induced Regeneration.

Platts, part of S&P Global Energy, assessed Generic ACCU at A$36.75/mtCO2e ($23.85/mtCO2e) on Aug. 22, last assessed at the same level on Jan. 7, marking a more-than-seven-month high.

The Generic no-AD ACCU differential was assessed at 30 Australian cents/mtCO2e Aug. 22, indicating that Generic no-AD was at A$37.05/mtCO2e -- a more-than-eight-month high as Platts assessed it at the same level on Dec. 18, 2024.

Similarly, Human-Induced Regeneration ACCU was assessed at A$37/mtCO2e Aug. 22, last higher on Dec. 18, 2024, at A$37.25/mtCO2e, representing a more-than-eight-month high.

Generic ACCUs are produced by projects focused on avoiding emissions, whereas HIR ACCUs are created by projects that store carbon through the regeneration of permanent native forests using alternative land management practices.

Early compliance demand, tighter policies

Market participants attributed this bullishness to the early reemergence of demand from compliance entities, or Safeguard facilities.

The Safeguard Mechanism applies to facilities that emit more than 100,000 mtCO2e in a year and it sets legislated limits, known as baselines, on the net greenhouse gas emissions of covered Safeguard facilities.

"Just steady Safeguard demand and procurement [driving the market]," a Sydney-based ACCU developer said.

A China-based ACCU trader previously said the ACCU market is "well-supported" and would be able to break through A$37/mtCO2e, given that Safeguard demand has entered the market relatively earlier this year.

Historically, Safeguard demand drives up prices between late-September and the end of November.

"Prices could be materially higher into year-end. Perhaps there's thinking of tighter compliance policies to be announced, and it could also be an awareness that the Clean Energy Regulator is very tough on issuances and supply may be shorter than most assume," one Australia-based trader said.

Platts reported Aug. 14 that Australia's nationally determined targets for 2035 are expected to be announced in September ahead of the UN Climate Change Conference, as several participants were waiting for it to gauge market direction for ACCUs.

The country's Productivity Commission has suggested that the Safeguard Mechanism should cover more industrial facilities to reduce costs and increase demand.

Given that most of these policies have yet to come to the market and materially affect demand, participants expect that the ACCU prices will continue to climb.