Q&A: Over 100 entities trading Australia's ACCUs

The Australian Carbon Credit Unit (ACCU) market has developed significantly in recent years, with demand moving away from the federal government to the private sector. Argus spoke with the country's Clean Energy Regulator's (CER) chair and chief executive David Parker and executive general manager Carl Binning about that transformation. Edited highlights follow:

Demand for ACCUs had been typically driven by the federal government through carbon abatement contracts awarded in auctions but the market is becoming more diverse with rising volumes cancelled for voluntary purposes and an expected increase in surrenders under the safeguard mechanism. What's the approximate number of participants actively trading ACCUs now?

Parker: There's more than 100 entities trading actively in the market. That's both on the demand side and the supply side. Some of them are in both.

How does that compare with a few years ago?

Binning: It's growing year on year.

Parker: Around 20-30pc growth in successive years.

What's the role of the government in purchasing ACCUs now?

Parker: We no longer do the purchasing side [through auctions]. The government now has that function through the Department [of Climate Change, Energy, the Environment and Water] but they can do other things.

Binning: The government transferred the ERF [Emissions Reduction Fund] funding to the Powering the Regions Fund and that fund has a mandate to purchase ACCUs. But at this time there is no government direction to purchase.

The CER still has a purchasing function to build up volumes under its cost containment reserve, which can only be accessed by safeguard facilities that exceed their annual emissions baselines and are unable to buy ACCUs from other sources. In that case, they would need to pay more than A$75 during the next fiscal year. This is more than double the current prices for ACCUs but how would that cost containment reserve work exactly if spot prices reached that triggering level? For instance, would a single company be able to buy all or most volumes if it bid first?

Parker: Good question, we don't know the answer.

Binning: The government is currently consulting on the design of the cost containment measure.

One of CER's main works is the implementation of a new registry replacing the Australian National Registry of Emissions Units (ANREU). Is this going to solve some of the transparency limitations of the current registry?

Parker: I'm very much in favour of transparency. We'll do as much as we possibly can in terms of putting out data, subject to the legal constraints.

Binning: The Chubb review has been implemented in three stages. That created the capacity to make a rule under the legislation which enables more data to be published. And the government has accepted the recommendation, so we would expect some time over the next 12 to 18 months for some rules to be made to make that data available. And as David said, as a regulator, we welcome the shift towards greater transparency.

What sort of data should we expect to see publicly available for the first time?

Binning: I think some project level data. One of the challenges with the integrity debate is that we have data that is not accessible to the marketplace. So where there are on-ground checks being done, for example, making some of those checks more transparent and visible to the marketplace will give it confidence.

Should we expect to have access to individual ACCU transfers between accounts, as we currently have for large-scale generation certificates in CER's REC registry or even ACCU holdings of individual account holders?

Parker: We hope so. We do publish some information on that but it's aggregated information.

Binning: One of the challenges with the ANREU registry is distinguishing between intermediaries in the marketplace that are holding ACCUs to further sell them versus entities that may be holding ACCUs to pass on to safeguard facilities for compliance purposes. Safeguard entities are large corporations, so they often have quite a significant number of related entities. Over time — and you'll see in the next quarterly market report — we're trying to get better at understanding those holdings that are held by related entities for the safeguard mechanism, so we get a stronger sense of how much of the demand has been taken up through the new safeguard mechanism. I think progressively we'll get better at that, but it's not as simple as it might be said.

Is the new registry still expected to be operational in the second half of 2024, with the new carbon spot exchange coming online by the beginning of 2025?

Parker: We hope so. We are about to put out a consultation paper on what the market wants to see in the exchange traded platform.

Binning: Our consultation is about understanding the role of an exchange traded fund in complementing all the other markets that are emerging — including futures markets and secondary markets — whilst we still progress the registry, which underpins the whole thing.

By Juan Weik