Breaking News: Macquarie Initiates Coverage on Australian Carbon Market – What You Need to Know for Your Investments
As Australia aims to cut emissions under the Paris Agreement, the Australian carbon market is crucial for reducing industrial emissions, covering about 28% of the country’s total emissions. This market focuses on high-emission industries like mining and oil and gas extraction.
Companies in these sectors must follow strict rules by using Australian Carbon Credit Units (ACCUs) or Safeguard Mechanism Credits (SMCs) to reduce their emissions. Non-compliance can lead to penalties of up to A$250 per tonne.
Macquarie analysts predict a supply-demand gap opening up in 2027 due to baseline reductions and new high-emission facilities. Demand for ACCUs is expected to rise significantly by 2030.
Currently, the market is oversupplied with approximately 41 million ACCUs in circulation, but as compliance obligations become stricter, this surplus is likely to diminish, leading to a tighter market.
Macquarie estimates that ACCU prices will reach around A$55 per tonne in the long term, reflecting the cost needed to bring new carbon offset projects online. The forecasted price increase is expected to incentivize the development of new initiatives.
While the market outlook is positive, there are risks of oversupply due to an increase in project registrations. A possible regulatory event in 2025 and the launch of the Integrated Farm and Land Management (IFLM) program by 2026 could also impact the carbon market.
In conclusion, the Australian carbon market presents investment opportunities as demand for ACCUs is expected to rise, leading to potential price increases. Understanding the market dynamics and upcoming regulatory changes is crucial for investors looking to capitalize on this sector.