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Q4 2023 | Emergence of a liquid Australian Carbon Market

January 24, 2024

Australian Carbon Credit Units Industry Insights and News – December 23 Quarter 

In brief 

  • The Clean Energy Regulator (CER) softened its projection of 2023 ACCU supply from 18 million to 17 million. Additional time taken to complete new gateway audit hurdles associated with the generation of ACCUs from the Human-induced regeneration (HIR) method and lower issuance of landfill gas credits accounted for the reduction. 
  • The CER and the Australian Securities Exchange (ASX) are working together to develop an effective model for a carbon exchange market, initially for Australian carbon credit units (ACCUs).
  • Entities operating facilities covered by the new safeguard mechanism (effective 01 July 2023) are continuing to accumulate ACCUs to meet anticipated compliance obligations from the new safeguard rules. 
  • The latest pilot arrangements for fixed delivery exits (allowing contract holders to exit fixed delivery contracts over a limited window) continue to facilitate market liquidity. 
  • Generic ACCU spot prices traded in the $31-33.50 range over Q4, modestly up on the $30.50 – $32.00 range in the previous quarter. 
  • The Human-induced regeneration method expires and consultation is being done on a new Integrated Farm and Land Management (IFLM) method.
  • The Federal Government continued the implementation of various recommendations from the Independent Review of Australian Carbon Credits (‘the Chubb review’). 
  • The Federal Government’s Climate Change Authority (CCA) completed its fourth statutory review of the ACCU scheme finding the scheme to be fundamentally well-designed and endorsing many of the Chubb Review recommendations.

CER Quarterly Carbon Market Update 

ACCU holdings in the Australian National Registry of Emissions Units increased by a record 7 million from 25.9 million to 33.5 million in 3Q 2023. While market participants are dominated by intermediaries (10.7 million ACCUs) and project proponents (11.3 million ACCUs), the rising impact of the Safeguard entities (5.4 million ACCUs) is of note. The increase in Safeguard holdings likely reflects safeguard entities hedging to meet future compliance obligations or seeing market trading opportunities.

Safeguard Mechanism facilities need to reduce net emissions by more than 200 million tonnes by 2030. More buying activity is expected early in the 2024-25 financial year as Safeguard entities finalise compliance plans and prepare for the first compliance date of 31 March 2025.  

Source: Clean Energy Regulator, Dec 2023

At the same time, the CER is accumulating ACCUs in a ‘cost containment’ reserve as part of the Safeguard Mechanism policy objective of limiting costs of compliance, capped at $75/tonne. With ACCUs available at a lower price in the market compared to the $75/tonne cost containment reserve, buying activity in the market is expected to build.  

The positive market liquidity effect of pilot arrangements (allowing contract holders to exit fixed delivery contracts over a limited window) was again apparent in 3Q 2023. These arrangements (which began with the first pilot in March 2022) enable fixed delivery contract holders to sell ACCUs to the market rather than to the CER. During the third pilot exit window in Q3, of the eligible 9.3 million ACCUs due for delivery to the CER, 4.1 million were instead made available to the market.

Generation Methods 

The HIR method expired on 30 September 2023 under the usual method ‘sunset’ rules (10 years after registration). Existing projects can continue to generate ACCUs for the remainder of their credit periods (up to 25 years) but no new HIR projects can be registered. The HIR Method is the most prominent of all ‘nature-based’ methods and accounts for about a third of ACCUs generated under the ACCU scheme. No replacement method is expected in the near-term leading to some market concerns about a future shortfall in supply.

The CER is consulting on a new method, the Integrated Farm and Land Management (IFLM) method. However, it is unlikely to be approved before June 2024 at the earliest, and market participants do not anticipate projects under the method to generate ACCUs much earlier than 2026.

Australian  Carbon Exchange Developments

The CER and the Australian Securities Exchange (ASX) are working together to develop an effective model for a carbon exchange market. The project aims to increase market transparency and accessibility around the trade of ACCUs.  Trading in other certificates may follow in the future.

In December 2023, the CER entered a contract to develop and deliver a modern Unit & Certificate Register as an integral part of the Australian Carbon Exchange.  The Register should be operating by the second half of 2024 and the Australian Carbon Exchange is set to be launched between late 2024 and early 2025.

Independent Review of Australian Carbon Credits (‘the Chubb review’) and Climate Change Authority Review

The federal government continued the implementation of various recommendations from the Chubb Review. To improve ACCU scheme transparency, the CER has commenced publishing carbon estimation area data for projects on the ACCU scheme project register, including an interactive project map. The map shows the volume, location, and type of projects happening across Australia.

The Climate Change Authority (CCA), completed its fourth review (every three years) of the ACCU Scheme in Dec 2023. The CCA echoed the Chubb Review in concluding that the ACCU Scheme is fundamentally well-designed and endorsed Chubb Review recommendations for greater transparency and more regular reviews of methods for calculating abatement to bolster integrity and maintain confidence in the scheme.


Signs of a more liquid ACCU market are beginning to emerge. Rising demand from Safeguard entities, a more prominent role for intermediaries (facilitating trading between the supply and demand sides), improved market liquidity from the third fixed delivery exit pilot window arrangements, and progress towards an effective model for a carbon exchange market are indications of an evolving Australian carbon market. We anticipate that developments in 2024 are likely to reinforce this trend.  


This report is for information purposes only and is not intended as an offer or solicitation for wholesale clients as defined in s761G of the Corp[orations Act 2001 (Cth). This report does not take into account the investment objectives, circumstances, financial situation or particular needs of any particular person and does not constitute personal advice. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision. Evolution Trustees (AFSL 486217) does not guarantee repayment of capital or any particular rate of return. Past performance is no guarantee of future performance. Statements of fact in this report have been obtained from and are based upon sources that Evolution Trustees believes to be reliable, but Evolution Trustees does not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions and estimates included in this report constitute Evolution Trustees judgement as at the date of this communication and are subject to change without notice. This article may contain forward-looking statements regarding our intent, belief, or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. Evolution Trustees does not undertake any obligation to revise any forward-looking statements to reflect events and circumstances after the date of this website.

About Evolution Trustees

Evolution Trustees is a leading independent provider of Australian professional fiduciary services to fund managers, institutional asset investors and debt providers. Established in 2016, Evolution Trustees now has over $A10bn of funds under supervision and provides services to over 160 entities. Evolution holds an AFSL that authorises it to provide general advice and deal in Australian Carbon Credit Units (ACCUs) and eligible international emissions units. Evolution Trustees is a recognised leader in supporting inbound institutional investors establish structures to invest in Australian real estate.

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