First ACCU-SMC swap trade sparks mixed reaction amid low SMC liquidity

The first swap trade between Australian Carbon Credit Units Generic without Avoided Deforestation and Safeguard Mechanism Credits in the brokered market concluded at 60 Australian cents/mtCO2e (38 cents/mtCO2e) for 50,000 mt on March 21.

The swap triggered varied responses from the market amid the slow liquidity and lack of transparency of SMCs, according to sources.

SMCs are tradable credits generated when a Safeguard facility reduces emissions beyond its baseline. They allow facilities with lower emissions reduction costs to sell their SMCs to facilities with higher costs.

On March 20, an offer was heard for SMCs at A$32.20/mtCO2e, and Platts, part of S&P Global Commodity Insights, assessed ACCU Generic No AD at A$33/mtCO2e. The swap trade on March 21 indicates that the discount for SMCs to ACCU Generic No AD shrunk in a day.

"I think [the discount] should be much bigger, but all the price activity in the past couple of weeks leads me to believe I am wrong. A 60-cent discount is [still] very interesting to see," a Sydney-based broker said on the first firm spread heard traded between ACCUs and SMCs.

Platts assessed ACCU Generic at A$33.05/mtCO2e and the ACCU Generic No AD differential at 5 Australian cents/mtCO2e on March 21, up 5 Australian cents/mtCO2e during the session.

Split market sentiment on lone trade

The trade participants were unclear as the details of SMC trades remain exclusive to the parties involved, but market sources suggested that it was likely between Safeguard entities.

"I'm not sure why you would sell ACCUs and buy SMCs for [60 Australian cents/mtCO2e]. The other way around, I get it," the broker said, suggesting it would be less profitable to sell ACCUs and hold SMCs.

"SMCs should be worth much less than ACCUs, but clearly that isn't the case yet," the broker added.

However, one ACCU trader said that the swap trade was not strongly reflective of the pricing of SMCs.

"The swap between ACCUs and SMCs cannot be defined by its spread of [60 Australian cents/mtCO2e] due to limited liquidity. People may have differing ideas on the spread," the trader said.

Market participants do not expect an uptick in SMC trading, especially before the compliance deadline on March 31. This aligns with the previous view from Australia's Clean Energy Regulator, intermediaries, banks and developers that substantial volumes were not expected to trade until after the deadline.

Platts previously reported the maiden trade for SMCs transacted on Feb. 27, which was concluded by Melbourne-based corporate energy transition service provider CORE Markets between a Safeguard facility and unnamed buyers.

The trade involved 190,000 mt of SMCs sold at A$34/mtCO2e, while the Platts assessed price for ACCU Generic was A$34.76/mtCO2e for that day. This put the SMC discount to ACCUs at around 76 Australian cents/mtCO2e on Feb. 27.

With the compliance deadline approaching, ACCU trading has been rangebound at A$33-34/mtCO2e for most of 2025. Participants look forward to more post-deadline trading and view the federal election in May as a key market driver.