The past quarter has, like the rest of the world, had an interesting journey for the carbon offset trading market.
Covid-19 has resulted in several companies reassessing their requirements for future carbon offsets, or just holding off to see what the impact will be. As a result, there has been little liquidity in the market and trades have been relatively limited. The last trade in the spot market occurred in early July at $15.85/ACCU for 8,000 ACCUs. This trade was preceded by a trade of 15,000 ACCUs two weeks earlier. This provides insight into the volume of spot trading into the market at present. But of course, spot trades are only one of the options. ERF contracts (Carbon Abatement Contracts) and other contracts on the secondary market provide a more predictable alternative as they are typically for multiple years.
A recent development from the Clean Energy Regulator is to offer an Optional Delivery in addition to the regular Fixed Delivery. If a project proponent successfully bids for an Optional Delivery, they have the option (i.e., a choice) of delivering an agreed (fixed) volume of ACCUs to the CER at a set (firm) price. In the event the proponent is able to find a secondary market purchaser, they can choose to deliver to that party and therefore not exercise its option to deliver to the CER via the CAC. This change is particularly exciting for the industry because it recognizes the increasing role of the secondary market in purchasing ACCUs as the market grows, and provides developers with a “backstop” to ensure their volumes can be sold if there are no secondary market buyers. Just as importantly, it may provide insight into the government plans to ensure that there is a growing secondary market and reduce the reliance on the government for such projects. Overall, this change is seen as a major benefit to those with ACCUs to sell.