Australia’s Clean Energy Regulator announced on Tuesday that a total of 7.6 million tonnes of Australian Carbon Credit Units (ACCUs) has been traded through contracts in the auction held in April, with a potential value of 131 million Australian dollars (US$ 98 million).
The abatement would be spread across 25 projects, according to the agency, and would include emissions reductions through revegetation, soil carbon, and industrial efficiency projects.
While the government has offered the highest price ever for carbon offset projects, trading volumes have slumped, well below earlier auctions which regularly secured contracts for 40 million tonnes of carbon credits.
Since the contract price offered by the government is much lower than the price on the open market, the Regulator is struggling to attract new emission reduction projects to participate in the Emission Reduction Fund.
Early in March, the Australian government indicated that carbon traders who had signed contracts with the government are allowed to opt out of the agreements and sell their ACCUs on the open market for a higher price. The move is expected to generate windfall profits that can be distributed to farmers.
However, the surprising announcement along with and the turmoil in the global energy market have resulted in the price fall of ACCUs, which is currently trading at around AU$30 in the open market, after reaching a high of AU$57 per unit in January. Despite the slide, the price is still almost twice the price offered by the government.
The average price offered by the Regulator in the latest auction was AU$17.35 per ACCU, the highest price offered by the agency to date and a 2.4% increase from the previous auction held in October.
All contracts provided by the Regulator are “optional delivery,” which means that projects will have the choice, but not the responsibility, to sell their ACCUs to the government at the agreed-upon price.
David Parker, Chair of the Clean Energy Regulator, estimates that most of the emission reduction projects who signed contracts in the latest auction will not sell ACCUs to the government. He believes the deals are more likely to serve as a price floor for projects that will otherwise sell ACCUs on the open market, where they can take advantage of more lucrative prices.