Scheme sends carbon credit price soaring
The introduction of Labor’s centrepiece emission reduction scheme has driven the price of Australian carbon credits to a six-month high, as heavy emitters snap up abatement credits to meet their new requirements.
Labor last year secured sufficient support to pass into law its beefed-up safeguard mechanism, the centrepiece of its plan to reach net-zero emissions by 2050.
The strengthened safeguard mechanism – a scheme first introduced under the Coalition – requires Australia’s 215 largest polluters to cut their annual emissions by about 5 per cent every year, which they are initially achieving through the use of carbon emission credits.
As a result, the price of an Australian Carbon Credit Unit (ACCU) hit a six-month high this week, which RepuTex executive director Hugh Grossman said was driven by corporate positioning.
“The market began to heat up over November and December, with broker traded volumes reaching a 10-month high behind an uptick in compliance buying,” he said.
The scheme only allows the 215 corporates to use ACCUs rather than foreign credits.
It is supposed to incentivise investment in technology to lower emissions, which will likely drive up the price of the contracts, Mr Grossman said. RepuTex tips growing demand to meet compliance requirements in the immediate future.
While the use of ACCUs will be welcomed by some as a boost to Australia’s climate ambitions, the use of abatement credits rather than emission reductions will stoke criticism from opponents to the scheme.