This report is produced monthly and provides a high-level overview of the key developments in select compliance and voluntary carbon and biodiversity markets.
In this month's Global Environmental Market Report, we cover key developments in select compliance carbon markets and provide an overview of the month in the voluntary carbon market.
The coverage also includes an update on emerging biodiversity markets.
*Please note: This report is designed to provide a high-level overview of the key developments in compliance and voluntary carbon markets. Our in-market team produces daily and detailed updates and trade reports to CORE Markets software subscribers and clients. Contact us to find out more.
This month we cover key developments in the Australian, New Zealand and European compliance carbon markets.
In July, the ACCU market showed modest fluctuations. Generic spot ACCUs opened at A$33.75, peaked at A$34.75 on July 8th, and ended at A$34.50, a 2.2% increase over the month. Human Induced Regeneration (HIR) spot ACCUs also began at A$33.75 on July 4th, reaching a high of A$34.75 in mid-July, before closing at A$34.50 and aligning with Generic spot prices by month’s end. The HIR premium over Generic spots peaked at A$0.50 on July 18th but narrowed to parity by July 30th.
July’s trade volumes dropped substantially to 1.2 million units, down 44% from June’s 2.144 million. Generic ACCUs represented 76% of the total with 913k units traded, including 59% tagged 'No Avoided Deforestation' (NO AD). HIR ACCU spots accounted for 16.7% of trades, reflecting a 5.5% increase from June.
Peak trading occurred on July 11th with 220k ACCUs traded, including significant transactions of 50k Generic spots at $34.75. July’s largest trade was a 70k Generic spots parcel at A$33.80 at the end of the month. Notable trades also included an Environmental Plantings spot trade at A$49.00 on July 12th and a Savanna Fire Management spot trade at A$35.00 in mid-July.
ACCU swaps included a significant 50k HIR/NO AD parcel at A$0.30.
A Dec24 NO AD forward trade was reported in 25k units at A$35.00 on July 11th.
Derivatives were limited to one trade early in the month; a Feb25 A$30 Put option for 50k units at A$1.00.
The Clean Energy Regulator (CER) issued 1,074,530 ACCUs in July, a 35.6% decline from June's issuance of 1.54 million. The CER targets an issuance of 20 million ACCUs in 2024. Around 8.68 million units have been issued from January to July 31st, representing 43% of that target.
Key issuances included 75k ACCUs to the Moquilambo Avoided Deforestation Project, 62k to Shell’s Out Performers Energy Efficiency project, and at least 60k to the Wanjina-Wunggurr Aboriginal Corporation for Savanna Fire Management. Five new projects were added to the CER’s registry in July and are now eligible to earn ACCU credits.
For a comprehensive update on the ACCU market, read our July 2024 ACCU Monthly Market Report
Learn more about our ACCU Market Forecast Report, a method-specific ACCU market supply, demand and price forecast
NZU prices remained rangebound in July. The month began with NZU prices at NZ$51.50, reaching a high of NZ$54.75 before retracing to close at NZ$52.50 (based on daily closing prices). This modest increase of NZ$1.00 month-on-month highlights a market that continues to trade within a relatively narrow range, despite reasonable volume changing hands in the month.
July saw New Zealand’s draft second Emissions Reduction Plan released. The draft plan suggests that long-term NZU prices could stabilise around NZ$50 as the government aims for a least-cost pathway to achieve its climate goals. However, the plan has been criticized for focusing more on net emissions reductions rather than gross reductions, raising questions about its effectiveness in driving meaningful climate action.
July also saw the release of more granular data from New Zealand’s Environmental Protection Authority (EPA) concerning the May 31 compliance surrender. According to the EPA, there was a net reduction of 25.5 million units in the privately held NZU stockpile, which now stands at 144 million units, the lowest level since June 2021, though still a considerable surplus.
The surplus, along with uncertainty surrounding upcoming government decisions, contributes to the cautious sentiment among market participants.
Overall, July saw steady, if uneventful, market activity with NZU prices remaining within a narrow range. As the market continues to navigate policy changes, participants remain vigilant for clearer signals on the future direction of the market.
The European carbon market continued its volatile trajectory from previous months, with the benchmark Dec24 contract experiencing notable fluctuations. July's price action reflected ongoing volatility influenced by both internal market dynamics and external factors, such as fluctuations in gas prices. The month began with a rise in prices, reaching a peak of €70.67 on July 3rd, perhaps driven by speculative trading and heightened market activity. However, the upward momentum was short-lived. By July 10th, prices had fallen to €67.96 due to concerns over oversupply and weaker demand.
After a brief rebound to €69.19 on July 12th, the Dec24 EUA contract entered a period of sustained decline. By July 22nd, prices had dropped to a monthly low of €64.72, reflecting a bearish sentiment that prevailed through much of July. Traders’ subdued demand and an oversupply of certificates may have influenced this decline.
In contrast, European gas prices saw a significant increase in the latter half of July. Sharp rises in British near-term gas prices, driven by unplanned outages and increased demand for cooling, spurred upward pressure on the forward gas markets. This increase may have contributed to a rebound in EUA prices as EUAs hit their lowest point, before rising by 5.5% to €68.41 on July 24th.
The final week of July saw a continued recovery in EUA prices. By July 31st, the Dec24 contract had climbed to €69.24, closing the month on a more positive note despite the earlier declines.
Voluntary carbon markets (VCM) saw low trade volumes and pricing continue into July, induced by the northern hemisphere’s quieter summer period. One notable exception occurred in the week to July 30th, where exchange platform CBL reported a weekly volume of 700k.
This marked the highest weekly reported trade volume for the year to date but did not appear to drive higher prices.
Late in the month, Verra Carbon Standard (VCS) launched ABACUS, a new quality label for forestry methodologies designed to restore confidence and provide important quality assurances to buyers in the voluntary carbon market.
In other news, on July 30th the Science Based Targets Initiative (STBi), a validator of private sector voluntary climate targets, released four technical publications as part of its Corporate Net Zero Standard review.
The outputs sought to evaluate the effectiveness Environmental Attribute Certificates, including carbon credits in supporting corporate climate action. However, SBTi noted that the findings were mixed with further work required to draw conclusions.
The organisation now invites stakeholders to provide feedback on the ‘Scope 3 discussion paper’ (one of the four publications), prior to the release of the draft Corporate Net Zero standard in Q4 of this year.
Select price movement highlights:
This month we saw several updates to global standards in response to requests for greater alignment and structure in reporting and claim frameworks.
Update on reporting standards and governing bodies
European Union (EU)
Americas
A recent study funded by the Department of Climate Change, Energy, the Environment and Water found that 30% of the Nature Repair Market pilot project sites are in worse condition than before the projects started. The study found that 55% had maintained their conditions and only 10% had improved.
The pilot ran between April and October 2023. Pilot projects were a mix between ecosystem and species projects in Victoria and Queensland.
These findings require further investigation into the problem and highlights the need for improved standards in the upcoming launch of the market.
The Australian Government has launched a $3 million tender for the Nature Repair Market initiative, seeking experts to develop methods for landholders to protect and restore habitats.
The NSW Government announced significant reforms to the Biodiversity Conservation Act 2016, in response to a critical 2023 review. The reforms include adopting 49 of the 58 recommendations from the ‘Henry Review’, with improvements to the biodiversity offsets system and the introduction of a statewide nature strategy.
The Biodiversity Council welcomed these reforms, but demand more ambitious targets. Key changes include overhauling the offsets system, eliminating discounts for mine-site rehabilitation, and incorporating Aboriginal cultural values. Despite these steps, the review highlights a need for more robust action to prevent ongoing habitat destruction and its impact on threatened species.
Australian Biodiversity Credits Public Pricing Benchmark
Data used for the following chart was captured as of 31/07 from the NSW Biodiversity Offsets Scheme Credit Transactions Register
Biodiversity and nature markets are a quicky evolving space. The CORE Markets team has released an introductory guide on the topic. Learn more here
The events outlined in this month’s update highlight the evolving nature of global carbon and environmental markets and the complexity of the net zero transition.
To discuss your unique requirements, get in touch with our team today to explore how we can help.
Global Environmental Markets Report - July 2024
