As uncertainty grips global energy markets, Australian Carbon Credit Units have seen their first continuous drop in value in over a year, with the price ending on Thursday at AU$46.75 per tonne, down nearly 20% from the all-time highs achieved in January.
Over the past few years, a rising number of corporate polluters scale up commitments to decarbonization and set their own zero emission goals, driving up demand for locally generated carbon credits.
The offset prices have thus more than tripled in value over the course of 2021. Carbon market analyst Reputex suggested that the recent slump is the market’s response to the spike in offset price.
According to Reputex, there had been a shift in market sentiment as the supply of ACCUs increased, more offset projects came online, and speculation grew about whether the federal government would facilitate the release of previously contracted projects under the Emissions Reduction Fund (ERF) to participate in the voluntary market.
The decline in Australian carbon credit units has been less significant than that witnessed in the European market, added Reputex, who attributes this to a local market where supply for ACCUs remains tight and there is less direct exposure to Europe's rising energy prices.
The data shows that while forward prices have remained flat since mid-February, trading volumes of carbon units have increased, indicating that the market is stabilizing following the bull run last year.
As a result of the influx of new accounts and entrants, traded volumes soared to a new high in February, with 416,000 units traded in the spot market, reaching a new high, and another 160,00 units traded in early March.
Reputex also remarked, “Despite the current volatility, longer-term fundamentals remain good thanks to Australia's net zero goal.”