ACCU Market Monthly Report - February 2024

ACCU market overview for February '24

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ACCU market highlights

The ACCU market saw volumes double and liquidity improve in February as the increase in demand due to the steadily emerging Safeguard Mechanism-liable participants is beginning to take hold in the market.

Generic ACCUs claimed a significant portion of the traded volumes this month (74%), suggesting that the Safeguard facility participants are displaying price sensitivity in the market by opting for the cheapest credits available, an unsurprising function of buying due compliance obligations.

Greater demand for Generics, both with and without the No Avoided Deforestation (No AD) label, saw their prices rise, with many trades at volumes that required buyers to pay the market a step higher to secure the units.

Conversely, Human Induced Regeneration (HIR) ACCUs levels declined across the month, causing the HIR/Generic ACCU spread to tighten, a possible result of the increased attention on Generics. This was potentially compounded by participants then sensing that this trend might continue, thus leading them to sell out their HIRs in exchange for Generics, thereby exasperating the erosion of the premium of HIRs over Generics.

Further market dynamism has been displayed by an increase in ACCU derivate trades in February. This, included three options and two forwards, suggesting that traders are looking to establish more intricate positions and another indication of healthy liquidity in the market.  

A Native Forest from Managed Regrowth (NFMR) spot ACCU traded at $35.75 in 60k at the start of the month. Additionally, Savanna Burning without Indigenous co-benefits spot ACCUs traded again, with two trades being dealt at $35.60, compressing the premium to Generics further to just $0.10. This is reflecting the trend that has been witnessed in the primary market for Savanna Burning without Indigenous co-benefits ACCUs.

Method-specific price movements and volumes traded

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ACCU price

• Generic spot ACCUs opened the month and broke their quiet streak with a trade agreed at $35.00 on the 1st of February, which was sideways from the previous month’s closing trade on 25th January.
  
  With the opening level being the lowest price of the month, the Generic price steadily climbed across February, reaching a high of $36.25 on the 14th for multiple No Avoided Deforestation (No AD) parcels before closing $0.55 lower at $35.70, representing a 2% gain across the month.
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• Conversely, Human-Induced Regeneration (HIR) ACCUs softened in February, causing the circa $2.50 premium to Generics to erode to $1.25 by the end of the month. HIR ACCUs opened at $37.75 on the 5th and rose by $0.25 to its their month’s peak of $38.00. However, the second half of the month saw the price decline, with the closing level of $37.25 also being the month’s low and amounting to a 1.32% fall over February.
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• A Native Forest from Managed Regrowth (NFMR) spot ACCU traded at $35.75 on 5th February, a notable trade from a methodology that experiences significantly less liquidity than the likes of HIR, with the last reported trade being seen on 9th December 2022 at $34.00.
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• Two Savanna Burning without Indigenous co-benefits spot ACCUs also traded again, both at $35.60 on the 20th of February, $0.35 higher than their $35.25 prints in January but just $0.10 higher than where Generic spot ACCUs were trading on the day.
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• Numerous ACCU derivatives traded in February, including a $27.00 Dec24 ACCU Put option traded at $0.95 in 100k on 1st February, a $38.00 Oct24 ACCU Call traded at $4.16 in 150k on the 6th and a $34.00 Sep24 ACCU Put at $2.37 in 75k on 16th. Additionally, two Generic July24 ACCUs were reported on 16th February at $38.50 and $38.25 in 50k and 75k respectively.

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ACCU volumes traded

In February, a total of 2,139,000 ACCUs traded in the reported market, a 50% increase from January’s reported volumes of 1.425 million units. Generic ACCUs amounted to 1.574 million of this total, contributing to 73.6% of the market, 900k of which had the No AD tag.

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HIR ACCUs again claimed a smaller portion of the volume with 255k worth of reported trades, therefore just 11.92% of the secondary market. A significant contrast to the 575k units transacted the previous month, which represented 40.35% of the trades in January and thereby down 55.65% month on month.

The NFMR deal was for 60k credits and the two Savanna Burning trades were for 15k and 10k. Whilst the three option trades totaled 325k units and the two forward trades, 125k.

The largest trade was for the 150k $38.00 Oct24 ACCU Call, there were also three 100k parcels seen across the month; the $27.00 Dec24 ACCU Put and two Generic spot ACCUs, one of which having a No AD tag.

Trading volumes peaked on 16th February, with 347k credits transacting on the reported market, including the 75k $34.00 ACCU Put and the two Generic July24 ACCUs that totaled 125k.

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ACCU supply, issuance & project registration
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The Clean Energy Regulator (CER) issued over 1.241 million ACCUs in February, a 220,000 rise from the previous month’s total of 1.125 million units. The volume of ACCUs issued under the CER is now over 141.685 million units.

The largest round of issuance was in the second week of February, 386,000 ACCUs were awarded to 8 projects, more than double the previous week’s figure. Veolia Environmental Services’ Woodlaw Energy Generation project claimed around 62% of this total, with 240k of the ACCUs going to that project.

Throughout February, 24 projects were registered to the Emissions Reduction Fund (ERF), with no projects being revoked this month, it brings the total number of ACCU projects registered to 1,793.

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