Government Reforms and Market Stability
In 2023, Australia’s carbon market underwent significant changes, primarily due to new and updated legislation introduced by the Federal Labor Government. The year commenced with the release of the “Chubb-review,” led by former chief scientist Professor Ian Chubb.
This review, which examined the framework of the carbon market, concluded that the market was fundamentally sound but suggested minor modifications.
Another major development was the amendment of the ‘safeguard mechanism’, the principal legislation requiring large emitting companies to reduce emissions or purchase offsets. These changes have been closely monitored for their impact on the carbon market.
Market Price Trends
The Australian Carbon Credit Units (ACCU) market, previously known for its volatility, displayed relative stability this year. Unlike the previous year, which saw a dramatic fluctuation from $56.50 to $28, the ACCU prices in 2023 peaked at $38.95 and later stabilised around $30.
This stability was largely influenced by supply dynamics, with the Clean Energy Regulator (CER) delaying credit issuance during the Chubb review, followed by a surge in issuances post-review.
The modifications to the safeguard mechanism are anticipated to boost demand in the future, as companies will need to purchase ACCUs if their emissions exceed declining baselines leading up to 2030.
However, safeguard facilities are not required to report their emissions balance until 2025, and many are currently strategizing to meet the new regulations.
Soil Carbon Credits and Agricultural Involvement
A significant portion of the CER’s record ACCU issuances included the first large-scale soil carbon credits, a method closely aligned with agricultural systems.
After a period of uncertainty, where only one project generated credits in seven years, seven projects have now received credits, some worth millions of dollars.
Matthew Warnken, managing director of Agriprove, mentioned that small parcels of premium credits were sold for over $45 to a buyer seeking specific characteristics.
He noted that these premium credits were sold on a small scale, with some forward sold at a discount to finance projects. New registrations of soil carbon projects have decreased compared to the previous year.
Concerns Over Mulga Projects
While soil carbon gains momentum, methodologies used in the mulga lands of Western Queensland and New South Wales, such as Human-Induced Regeneration (HIR) and Avoided Deforestation (AD), have faced scrutiny.
Concerns raised by a group of scientists led to the Chubb review recommending the cancellation of the AD methodology and a reevaluation of HIR. The HAIR is expected to merge into a new methodology called the integrated farm method, to be finalised next year.
Despite these developments, concerns persist about the AD credits still in the market, with some carbon buyers reportedly avoiding AD credits. AgCarbon Central plans to explore this topic further in the coming year.
