Currently almost 140 million Australian Carbon Credit Units are contracted to the federal government's Emissions Reduction Fund at an average price of A$12 per unit - well below the spot market price of around A$46.75.
The Regulator said late yesterday that current holders of fixed delivery contracts will now be able to pay an exit fee to be released from fixed delivery obligations to the government to take advantage of the lucrative spot market.
Spot market prices of ACCUs have increased from $17 at the start of 2021 to $50 on 3 March 2022 - approximately a 200% increase, the regulator said, noting that market participants have seen increased private sector demand but also tight liquidity in the market - contributing to the run on prices.
The initiative will be open to all compliant contract holders who are in good standing with the regulator, and those willing will be able to exit their government contract within six-month windows between January 1 and June 30, and July 1 and December 31 - with the first window opening today until June 30.
The exit fee will be calculated by multiplying the contract price by the quantity of ACCUs to be released.
Energy, industry and emissions reduction Angus Taylor said any funds received under the process would be reinvested in the Emission Reduction Fund or new emission reduction initiatives.
"These reforms will lead to more ACCUs becoming available to the market in an orderly and transparent way, which will help meet the increasing voluntary demand for domestic offsets," Taylor said.
"This will allow projects to take advantage of higher market prices over time."
However, the intervention caused a 24% drop in ACCU spot prices by Friday evening, trading at A$35.40.
The Carbon Market Institute in response raised concerns about how the intervention would be perceived by investors and the community and the uncertain impact on the associated environmental outcomes.
"The changes, while coming with some guardrails, could deliver up to 100 million ACCUs at a value of up to A$2.4 billion to corporate or other private buyers over the next decade, based on likely market prices required to facilitate exit," CMI CEO John Connor said.
"However, they come with no public consultation, and are not linked to greater overall emission reduction commitments," he said.
Connor raised other recent interventions in the market, including the proposed additional veto power to the agriculture minister on certain carbon projects, and the announcement that companies will be required to have purchased at least 20% ACCUs in government administered "Climate Active" carbon neutral certification scheme.
"We are concerned that continuing arbitrary changes in Australia's carbon market will challenge investor as well as community confidence in supporting carbon reduction or removal activities credited by the government with ACCUs," he said.
