ACCU Market Monthly Report - January 2024

ACCU market overview for January '24

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ACCU market highlights

The ACCU market continues to make headway, with prices rising consistently across January.  Participants await the impact of the expected growing demand from Safeguard Mechanism-liable entities will have on the market in 2024.

Notable trades in January included two Savanna Burning without Indigenous co-benefits spot ACCUs that transacted at $35.25 in 50k and 25k, a significant drop from their last reported level of $39.00 in June 2023.

The price erosion is testament to the overarching preference within the market to removal rather than avoidance credits, as HIR traded at a $2.25 premium to the Savanna Burning trades at the time.

Meanwhile, Savanna Burning with Indigenous co-benefits spot ACCUs were marked at $46.00 at the time, reflecting the current levels of market stratification as well as the value currently being placed on credits with perceived high-integrity and strong marketability assets.

Method-specific price movements and volumes traded

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ACCU price

• Generic spot ACCUs opened the month at $33.75, 25c higher than December’s close of $33.50. The Generic price experienced slightly more volatility across January in comparison to the previous month’s consistent climb, reaching its high of $35.25 on 8th January for a No Avoided Deforestation (No AD) parcel before rebounding back to its opening level and low of the month of $33.75 on the 15th. The price rose again in the last third of the month, eventually moving to a close of $35.00, amounting to a 3.7% gain across January.
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• Human-Induced Regeneration (HIR) ACCUs continued to track the Generic price, with the circa $2.50 premium holding firm. HIRs opened the month at $37.00 on 5th January and moved up to $37.75 on the same day. The month’s low of $36.00 was reached on 17th January before climbing to its peak of $38.00 on 23rd January and eventually ending the month at $37.50, representing a 1.3% increase over January.
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• Two Savanna Burning without Indigenous co-benefits spot ACCUs traded, both at $35.25 on 19th January and 22nd January, notably below the HIR price which was trading at $37.50 at the time and down 9.61% from their last reported transaction at $39.00 on 20th June 2023.
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• No forwards or option trades were reported during January.
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ACCU volumes traded

• The total ACCUs traded in the reported market amounted to 1,425,000 in January, down 25.63% from December’s reported volume of 1.916 million units.
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• Generic spot ACCUs represented 800k and thereby 56.14% of this total. Of these Generic ACCUs 280k (35%) had the No AD label, a significantly smaller portion than December which saw 68% of Generic ACCUs having the No AD stipulation.
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• HIR ACCUs also represented a smaller piece of the ACCU market in January in comparison to the previous month, with 575k units transacted. They contributed 40.35% of the reported market in comparison to 46% in December.
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• The two Savanna Burning spot ACCU trades equalled 75k, one parcel of 50k and the second, 25k.
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• The overall lower trading volume goes hand in hand with the Australian holidays period with a return to stronger volumes to be expected.
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• Trading volumes peaked on the 10th with 350k units reported on the secondary market, including one 75k parcel for Generic spot ACCUs at $34.75 and the largest HIR parcel of the month, agreed at $37.50 in 50k.

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ACCU supply, issuance & project registration

• ACCUs issued in January amounted to 1,125,300 units, an increase from December’s total of 1,072,840 units and brings the number of ACCUs issued under the scheme to over 140.4 million units.
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• The first round of the year saw bumper volumes, with 1,021,000 units being handed out to 89 projects, over twice the 439k units issued in the last round of 2023, due to the holiday period aggregating several weeks’ worth of carbon credit minting. The second issuance saw a huge decline in volumes however, with just 24,300 ACCUs going to 4 HIR projects. The third issuance level grew to 80,000 units, but still significantly less than the first week’s figure.
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• Over the course of January, 28 new projects were registered to the Emissions Reduction Fund (ERF). This included 13 soil carbon projects and 2 projects that were voluntarily revoked (one avoided deforestation project and one HIR project), bringing the total number of ACCU projects registered to 1,769.
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• While compliance-related demand is expected to grow this year, supply factors are likely to dampen significant price gains for the time being.
  
  For example, the pilot exit arrangements of carbon abatement contracts (CAC) permits holders to sell ACCUs on the secondary markets, instead of delivering units to the government.
  
  This has contributed to oversupply in the market, meaning most ACCU prices are likely to be range-bound for the short to medium term. However, select projects and methodologies will continue to attract a premium.

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