Platts Generic ACCU price drops to 1.5-month low, HIR at one-month low amid selling pressure

The Platts assessment for Generic Australian carbon credit unit prices slipped to an over one-and-a-half-month low while Human-Induced Regeneration ACCUs fell to a more-than one-month low Dec. 3 on strong liquidity amid selling pressures, according to data from S&P Global Commodity Insights and market participants.

Platts, part of Commodity Insights, assessed generic ACCUs at A$37.40/mtCO2e ($24.25/mtCO2e), down A$3.15/mtCO2e on the day, and HIR ACCUs at A$38/mtCO2e, down A$2.70/mtCO2e on the day Dec. 3.

Generic ACCUs were last lower Oct. 16, while HIRs were last assessed at the same level Oct. 24.

Generic ACCUs are generated by avoided emissions-based projects, such as landfill gas and avoided deforestation, while HIR ACCUs are generated by projects that store carbon by regenerating permanent native forests through alternative land management practices.

Market reaction, expectations

Roughly 365,000 ACCUs were traded Dec. 3 with Generic without avoided deforestation making up about 70% of the total volume traded at 255,000 mt. HIR ACCUs followed at 75,000 mt and Generic ACCUs at 35,000 mt.

One ACCU trader said that safeguard buying has dried up so those who are holding volumes are rushing to sell, which is putting a downward pressure on prices, further leading to a spiral effect across the market.

The Safeguard Mechanism is a policy by the Australian government to reduce emissions and applies to selected new industrial facilities emitting more than 100,000 mtCO2e/year.

This selling happened just before the final quarterly carbon auction for the year in New Zealand on Dec. 4, as some market participants in the ACCUs scheme thought of selling their ACCUs to buy New Zealand Units, the trader added.

A Singapore-based ACCU broker also said that 700,000 mt of ACCUs were issued from landfill gas projects, so landfill developers decided to sell before the end of 2024.

"Prices jumped up so quickly [previously] that there weren't enough bids to support these high levels, so absence of strong bids and the sale of ACCUs by developers brought prices down ahead of year end," the broker added as traders, bankers, and opportunistic buyers also sold into the drop to buy at lower levels.

There will continue to be sporadic buying here and there but nothing of the magnitude that could pull prices back up, making it unlikely that prices will cross A$40/mtCO2e levels again even in the first quarter of 2025, the trader said.

Furthermore, market participants are worried that the Safeguard Mechanism Credits, which will be introduced to the market in February 2025, will weigh on demand. Therefore, they are choosing to sell and exit the market before prices fall further.

SMCs are tradeable credits generated within a regulated emissions limit that represent one metric ton of carbon dioxide equivalent of emissions below a facility's baseline. Safeguard facilities that earn SMCs can trade them by selling them to other safeguard facilities or surrender them to stay within their baseline.