Australian carbon trading volumes jump 50% as corporates place bets ahead of review


Australia’s carbon trading market has been booming over the past week with traded volumes leaping more than 50%, as big corporates race to secure offsets ahead of Labor’s pending industrial emissions reforms.

The surge in trading activity is a sign of growing confidence in Climate Change and Energy Minister Chris Bowen’s safeguard mechanism changes, which are on track to begin in July, and suggests some investors are betting Ian Chubb’s review of Australian Carbon Credit Units (ACCUs) will erase doubts about the credibility of some credits.

ACCUs based on activities in which farmers and other landowners “induce” carbon sequestration by planting trees or allowing landscapes to regrow hit $33.75 per tonne on Tuesday, 7% higher than a week ago, according to RepuTex.

About 600,000 units were traded hands during the first two weeks of November, more than during the whole of October, when 550,000 were bought and sold.

Of those, some 400,000 were forward contracts, particularly for delivery of ACCUs in March and July of next year.

The results were driven by large corporate buyers entering the market, said Hugh Grossman, managing director of energy and carbon markets at RepuTex. The increased corporate activity “indicates some early confidence in the outcome of the safeguard mechanism review,” Grossman added.

“Furthermore, feedback suggests that corporate buyers are comfortable with the risks posed by the Chubb review, and for the most part remain willing to deal with HIR [human-induced regeneration] projects.

The Chubb review has been taking evidence from stakeholders and experts ahead of a final report due on December 31 into concerns about the credibility of ACCUs.

The market has come under fire from academics and corporate buyers who say too many ACCUs fail to produce genuine carbon abatement or sequestration in addition to what would have occurred in any case.

At the same time, Bowen has made clear that ACCUs will be critical element of his planned safeguard mechanism changes, which will increase pressure on Australia’s 200 or so largest industrial, mining and manufacturing carbon emitters.

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