ERF auction buys high volume of abatement at least cost

The Clean Energy Regulator is pleased to announce that 6.8 million tonnes of carbon abatement at an average price of $16.94 was contracted for optional delivery at the 13th Emissions Reduction Fund (ERF) Auction held on 13 and 14 October 2021.

At Auction 13, 24 new Optional Delivery ERF contracts valued at more than $115 million were awarded and over 85 per cent of the volume offered was accepted. These contracts support investment in vegetation and agricultural carbon abatement projects across the country providing support and investment to rural and regional areas.

David Parker, Chair of the Clean Energy Regulator, said he was delighted with the result of Auction 13.

“This ERF auction continues the trend of the Government being able to use Optional Delivery contracts to support the market at prices below the spot market for immediate delivery. If these contracts are exercised it will help meet our statutory objective to secure maximum abatement at lowest cost.

“We purchased 85 per cent of the bids on offer, which shows the vibrancy of the market and willingness of scheme participants to bid competitively.”

Once again, the Optional Delivery contracts are the clear winner as all contracts awarded at Auction 13 were for Optional Delivery contracts. Optional Delivery contracts de-risk investment in projects while facilitating liquidity in the secondary market if contract holders choose to sell their carbon credits to others. Only a very small volume of Fixed Delivery contracts for abatement was offered and no bid was accepted.

Mr Parker said the clear preference of bidders for Optional Delivery contracts, highlights how Australia’s carbon market is evolving with increasing demand from the private sector for Australian Carbon Credit Units (ACCUs).

“Optional Delivery ERF contracts are playing an important role in under-writing private sector investment as the private market steps up to purchase more ACCUs.”

The Australian carbon market has gone from strength to strength in 2021 with over 1040 projects now registered and over 101 million tonnes of abatement achieved. The June quarter also saw a record breaking 5.7 million ACCUs issued.

Through its ERF auctions the Australian Government has committed $2.2 billion to projects that reduce emissions in rural and regional areas.

The ERF is one of the world’s most rigorous carbon offset programs. It supports high integrity carbon units backed by legislation with strong compliance assured by the independent Clean Energy Regulator. These high integrity standards underpin both scheme administration and the development of new methods.

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