Australian carbon price drops as investors liquidating credits


Australian carbon price drops as investors liquidating credits


After more than six months of rapid increase, the price of Australian Carbon Credit Units (ACCUs) has decreased in the last two weeks. ACCUs were trading at around AU$51/tonne of carbon dioxide equivalent this week, down from over AU$57/tonne at the start of the month, erasing all the market's gains in January.

Much of the increase occurred in the second half of last year, when businesses competed fiercely for a limited supply of ACCUs to offset their emissions, driving prices to triple in six months. Although the price recently plummeted, the market is no longer the same as it was at this time last year, when ACCUs were hovering at AU$16.

Hugh Grossman, CEO of Reputex Energy, stated that a big share of last year's purchases were investors and speculators trying to profit from the expanding market. Many of them began liquidating credits at the beginning of February, putting downward pressure on the price.

There has been a little profit taking from that part of the market over the previous couple of weeks because investors perceived $57 as an acceptable price, analyzed Grossman.

Other carbon trading programs throughout the world have followed the ACCU's path, with a steady rise last year and a drop this month. “A lot of the global market's decline is due to flat demand, which is really just a seasonal factor,” he added, “most of the procurement is voluntary on the part of corporations, there are often peaks and troughs around reporting periods.”

In February, the ACCU transacted a record number of credits on the spot market, indicating both robust demand and supply.

He went on saying, “it is an interesting situation since prices are down yet demand is much higher. It shows how much liquidation has occurred recently, which has helped to alleviate the supply crunch in the short term.”

Grossman suggested that any type of normal cycle with prices has peaks and troughs and the recent decrease in prices is expected to be short-term. He predicted that government policies and the approaching Federal Government election will become the driving force of the market. In addition, he expects the market to continue to grow over the next year, while more companies set their net zero targets and willingly enter the carbon market, making the outlook more promising.

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