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Signals, shifts and scenarios: What Q1 2025 reveals about Australia’s ACCU market

Signals, shifts and scenarios: What Q1 2025 reveals about Australia’s ACCU market

Australia’s carbon market is maturing - and in Q1 2025, clear signals of this have emerged. These signals, and their implications, are captured in CORE Markets’ latest quarterly ACCU supply, demand and price forecast.

Updated
May 30, 2025
Published
May 30, 2025
Signals, shifts and scenarios: What Q1 2025 reveals about Australia’s ACCU market

New compliance signals are reshaping how participants plan for ACCU procurement

Australia’s carbon market is maturing - and in Q1 2025, clear signals of this have emerged.

Increased data transparency on both the demand and supply sides of the ACCU market have recently come into effect, offering greater visibility into the future of the market - and how supply, pricing and participant behaviour are likely to evolve.

A noteworthy development in Q1 was the Clean Energy Regulator’s release of Safeguard Mechanism Credit (SMC) allocations. This data provides the market with new insights into how large emitters are managing compliance obligations and physical decarbonisation, bringing Australia’s scheme incrementally closer to mature frameworks like the EU ETS.

These signals, and their implications, are captured in CORE Markets’ latest quarterly ACCU forecast update - a key part of our Carbon Intelligence Package. Updated quarterly, the forecast incorporates fresh data from our carbon analytics platform, registry activity, and inputs from an expert advisory group.

The forecast helps market participants make sense of what’s shifting - and why it matters.

Keep reading to learn:

  • What’s new in the Q1 forecast model
  • Key demand and supply-side insights
  • What it all means for price dynamics

What’s new in our forecast model this quarter

The Q1 edition includes several key enhancements to how we model ACCU demand and supply (both from existing and new projects).

Demand-side updates:

  • Integration of SMC allocations: We have integrated SMC issuance data released by the CER to improve visibility into   direct emissions abatement within the Safeguard Mechanism.
  • Physical decarbonisation assumptions by facility type: We distinguish between Safeguard facilities that are early movers and those that are adopting a wait and watch approach towards physical abatement. This segmentation informs how we forecast the total volume of SMCs expected to be generated over the forecast horizon (up to FY40). Additionally, this version of the forecast also quantifies the impact of these SMCs on the overall ACCU demand.
  • Sector-specific decarbonisation assumptions: Cost curves for low- and zero-carbon technologies have been updated by sector. TEBA facility data from the CER has also informed revised demand trajectories , particularly within the manufacturing sector. Voluntary demand preferences: We have adjusted assumptions to reflect expected voluntary buyer preferences based on recent transaction patterns.

Supply-side updates:

  • Project pipeline analysis: Registry data has been refreshed to capture the current pipeline by method and stage.
  • Refined project failure assumptions: We have recalibrated failure and underperformance rates for both registered and proposed projects.
  • Method-specific investment responsiveness: Lead times and price thresholds have been incorporated to better reflect supply-side responsiveness.

Modelling enhancements:

  • New issuance forecasting: New issuance volumes are now forecast based on project size (in hectares), benchmarked against historical issuance rates by method. This increases confidence in projected output, regardless of scale.

Key insights from the Q1 2025 Forecast

When will demand peak? What’s driving it now?

Informed by the recent SMC issuance data from the CER, CORE Markets has modelled the SMC issuance landscape through to FY40. While these issuances do not change the peak ACCU demand, they affect the timing of demand peaks - now forecasted to shift from FY32 to FY35.

The CER has also released a list of entities granted TEBA status and this has clarified the extent of discounted baseline decline rates, particularly in the manufacturing sector. These updates provide greater precision around forecasted demand from Safeguard entities.

From FY35 onward, we expect Safeguard-related demand to stabilise as lower-cost, technologically mature decarbonisation solutions become more viable. Therefore, liable Safeguard entities are likely to prioritise direct abatement over ACCU retirement.

Voluntary demand, by contrast, is projected to grow steadily from FY30 this increase is driven by:

  • Increasing number of organisations setting net-zero targets and relying on high-integrity offsets for their hard-to-abate residual Scope 1 emissions;
  • A growing number of organisations setting Scope 3 emissions targets

Procurement behaviours remain distinct. Safeguard entities focus on cost efficiency, while voluntary buyers continue to align their procurement approaches with broader ESG narratives - favouring sequestration methods with perceived permanence, verifiability, and co-benefits.

How long will supply hold? Where will it come from next?

Most ACCU issuances come from a few dominant methods - primarily HIRs and landfill gas - but the pipeline is beginning to diversify. As demand grows and preferences shift, the composition and responsiveness of new supply will become more important.

Our models indicate that expected issuances from existing projects and current holdings, is sufficient to meet demand through to FY31. However, issuances from new projects are required by FY31 to cater to the demand.

We forecast that an increasing share of new issuances will come from nature-based removal projects, particularly Environmental Plantings, although these tend to carry higher upfront capital investment costs and longer lead times.

The evolution of demand - including the divergence between low-cost compliance needs and high-integrity voluntary preferences - will impact the price, supply elasticity, and attractiveness of different ACCU types.

These dynamics are likely to trigger the next wave of project development and influence the broader shape of the ACCU market between FY26 and FY40.

What does this mean for ACCU price dynamics?

Australia’s ACCU market isn’t one market - it’s many.

Yet, many public discussions continue to treat ACCUs as a single, undifferentiated unit.

CORE Markets’ price forecast by method reflects that different units carry different forms of value - whether due to higher generation costs, integrity characteristics, or co-benefits beyond carbon.

Built using method-level data and real-world market signals, our model accounts for:

  • Compliance and voluntary segmentation
  • Supply constraints across specific methods
  • Temporal shifts in demand linked to SMC uptake and abatement trajectories

The result is a scenario-based forecast that better reflects the complex reality of Australia’s carbon market. Developed by our Advisory team and peer-reviewed by a specialist industry group, it forms part of CORE Markets’ Carbon Intelligence Package.

Interpreting the signals

Australia’s carbon market is entering a more signal-rich phase - but navigating it still requires interpretation.

As compliance markets evolve and voluntary preferences shift, market participants need more than a headline price. They need insight into what’s driving demand, where supply is emerging, and how policy, preference, and performance intersect.

The Q1 2025 ACCU Forecast helps decode these dynamics — not just for today’s procurement, but for long-term positioning.

Want to go deeper?

The Q1 2025 ACCU Forecast is part of CORE Markets Carbon Intelligence Package - a decision-support tool for organisations with exposure to Australian and global carbon markets.

To learn more or request access, contact our team.

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