ACCU Market Monthly Report - March 2024

ACCU market overview for March '24

‍

ACCU market highlights

• The ACCU market experienced heightened volatility in March, feeding into further improvements in liquidity and another step up in volumes transacted, with a total of 2.499 million ACCUs traded in the reported market, amounting to a 16.83% increase in comparison to February.
  
  Both Generic and Human Induced Regeneration (HIR) unit prices fell over March, ending the steady price increase trend witnessed over recent months.  Generics opened at $35.50 and closed at $33.75, meanwhile HIRs moved from $36.75 to $34.00.
  
  The first half of the month saw prices grow, with a notable spike on 18th March to $36.30 and $38.00 for Generic and HIRs respectively following rumours that the Integrated Farming Land Management (IFLM) method, the expected replacement for the HIR method, was set to be discarded. However, clarification from the Department of Climate Change, Environment, Energy and Water’s (DCCEEW) put traders’ minds at ease. The department confirmed that there are no intentions to scrap the method, but that delays may occur, resulting in a period of thinner liquidity and softer prices.

• Weaker price levels overall may also be attributed to a potential easing of compliance demand following the flurry of activity pre the ACCU surrender deadline under the Safeguard Mechanism, which took place in February.
  ‍
• Concerns over the integrity of the HIR method led to a significant tightening of the HIR/Generic spread in the back half of the month, with certain instances of the methodologies trading on par at $32.50 on 27th March. The erosion of the HIR/Generic spread has already been observed  this year, largely due to emerging compliance buyers displaying less partiality with regards to methodologies and therefore contributing to an uptick in demand for Generics.
  
  This trend was compounded in March by further academic commentary from known critic, Prof. Andrew Mcintosh.  The coverage alleged that the transition from non-woody cover to sparse woody or forest cover has been over-estimated. However, as noted by the Carbon Market Institute, while the market reform currently underway is critical, it is also important to recognise that the study referenced relied, at least in part, on incomplete data sets.

Method-specific price movements and volumes traded

‍

ACCU price
‍

• Generic spot ACCUs opened the month with a trade agreed at $35.50 on 1st March, which was lower than the previous month’s closing trade of $35.70 on 29th February. Prices then saw a further drop, closing at $35.25.
  
  The Generic spot price moved higher to $35.75 on the 6th, holding these levels before climbing to the months peak of $36.30 on the 18th. From here however, the Generic spot ACCUs declined and dropped as low as $32.25 on the 27th, before bouncing back to $33.75. March closed here, representing an almost 5% decrease across the month.

• Spot prices for Human-Induced Regeneration (HIR) ACCUs commenced the month at $36.75, marking a decline from the previous month's closing rate of $37.25. These ACCUs steadily held ground, reaching levels as high as $38.00 on the 18th, before experiencing a notable downturn to $32.00, the lowest point of the month, on the 27th.
  
  Following this decline, HIR ACCUs saw a modest recovery, ending the month at $34.00. Concurrently, the initial circa $1.25 premium over Generics noted at the onset of March diminished to parity before subsequently re-establishing a $0.25 spread by month's end.
  
  See ‘ACCU market highlights’ section above for additional commentary.

• Savanna Fire Management without Indigenous co-benefits spot ACCUs, a methodology that experiences significantly less liquidity than Generics and HIR ACCUs, traded at $34.50 on the 26th March, flat to where a Generic No-AD parcel traded at the time, a drop from February levels of $35.60.
  ‍
• ACCU derivates traded in March, such as a Nov24 $41.00 ACCU Call option priced at $2.00 in 50k on 1st March, indicating a 28% volatility, and on 8th March, a May24 $37.00 ACCU Call traded at $1.45 in 100k, and a Jun24 $38.00 ACCU Call traded at $1.50 in 100k.

ACCU volumes traded
‍

In March, a total of 2,499,000 ACCUs traded in the reported market, a 16.83% increase from February’s reported volumes of 2.139 million units. Generic ACCUs made up 1.94 million of March’s units, contributing to 78% of the market, 864k of which had the No AD tag.

HIR ACCUs accounted for 510k units traded, constituting 20.4% of the ACCU market. This marked a significant 50% surge compared to February when HIR ACCUs represented only 11.92% of the market, with approximately 255k units traded. In March, Savanna Fire Management contributed 25k units to trading activity, while the combined total of three option trades amounted to 250k units.

Peak trading volumes were seen on 8th  March, with a total 715k being reported, including a 200k Generic No AD trade, and a 300k Generic parcel, both transacting at $35.75. Further significant volume was seen at the end of March, with 26th  March seeing two 100k Generic parcels trading at $33.75 and $34.00 respectively, the former with the No AD tag.

‍

ACCU supply, issuance & project registration
‍

The Clean Energy Regulator (CER) issued over 1.85 million ACCUs in March, a rise of approximately 600k from February’s total issuance of 1.24 million, bringing the total volume of ACCUs issued under the CER to over 143.5 million units.

A total of 34 projects were registered to begin creating ACCUs, contributing to a sum of 1,796 projects now actively generating ACCUs under the scheme. The registrations included 14 Soil Carbon projects, 10 Environmental Plantings projects and 3 Native Forest from Managed Regrowth projects, whose methodology has now expired as of 31st March.

The CER also reported the voluntary revocation of four projects in the ACCU scheme, none of which had generated any ACCUs, which brings the total number of projects revoked under the scheme to 286.

The Clean Energy Regulator issued a bumper 1.03 million ACCUs to 56 projects between 3rd-17th  March. Veolia Environmental Services was given a significant portion of the units, with around 359,500 ACCUs distributed across five Landfill Gas projects. Other notable recipients of ACCUs included LMS Energy, which obtained 142,500 ACCUs across 15 Landfill Gas projects, and Terra Carbon which was issued around 81,000 ACCUs for 12 projects in New South Wales and Queensland.

According to the CER’s Q4 2023 Quarterly Carbon Market Report, ACCU holdings grew by 2.7 million to a total of 36.2 million. The CER   issued 17.2 million ACCUs in 2023 and expects the issuance of ACCUs to reach a record 20 million in 2024.

‍

Stay up-to-date with ACCU market developments

‍

• Talk to us about your market approach and how CORE Markets can support your strategic and transactional needs across ACCU market, environmental market and clean energy markets.
• ‍Request a demo of our carbon markets analytics platform, which includes ACCU market data across major methodologies, including forward price curves.
• Track the Generic ACCU price, it’s updated on our website each day.‍
• Sign-up to receive our regular carbon and clean energy insights – including this ACCU Market Monthly Report – directly in your inbox. Simply click the ‘Subscribe now’ button on the bottom of this page.