Prices for Australian carbon units softened slightly throughout an uncertain 2020, according to a new analysis, but carbon traders are optimistic that stronger markets could emerge as a result of growing international pressure on the Morrison government to set a 2050 net-zero emissions target.
In a new analysis piece, Reputex said that prices for Australia’s Carbon Credit Units (ACCUs) had dipped slightly by the end of 2020, dropping 4.5 per cent from levels seen 12-months prior.
Australia’s voluntary carbon prices proved relatively robust throughout a turbulent 2020, finishing the year at just over $16.50 per tonne, after falling below $16 per tonne mid-way through the year.
Reputex said that many carbon traders were anticipating a positive outlook for Australia’s carbon markets in light of growing international momentum towards stronger emissions reduction targets and pressure being placed on laggard governments, including the Morrison government, by major international trading partners to adopt stronger climate policies.
“Over the year ahead, the prospect of a more ambitious long-term emissions target could lead to a more bullish outlook for ACCU prices, underpinned by momentum for the United States to return to the Paris Agreement, and expectations for laggard nations such as Australia to commit to more ambitious decarbonisation targets,” Reputex said.
Australia was amongst a number of countries that failed to set more ambitious emissions reduction targets through the first round of a ‘ratchet mechanism’, built into the Paris Agreement which is designed to see countries increase the strength of their emissions reduction targets on five-year intervals.
Australia simply re-submitted its existing 2030 emissions reduction target, to cut emissions by between 26 to 28 per cent. The Morrison government has argued that by setting a 2030 target, according to the rules of the Paris Agreement, it does not need to submit any updated target until 2025.
However, several of Australia’s major trading partners, including Japan, South Korea, China and the United Kingdom, all announced commitments to reach zero net emissions by a particular deadline – a goal the Morrison government had steadfastly refused to adopt.
The prospect of a Joe Biden presidency in the United States, combined with Democratic party control in both houses of the United States Congress, will see the United States return to the fold of countries acting on climate change.
Democratic control of both houses of Congress now presents an opportunity for a significantly wider range of measures, including the passage of legislation towards the implementation of measures drawn from the Green New Deal being pushed by progressive Democrats.
Control of Congress will enable the Democrats to introduce new federal funding support measures for renewable energy projects, the introduction of tighter fuel efficiency and vehicle emissions standards, as well as additional tax incentives for to support uptake for electric vehicles.
Joe Biden had already flagged that one of his early priorities as president will be to bring the United States back into the Paris Agreement, and with the backing of Congress, will now also be able to implement a range of new measures to support ambitious reductions in greenhouse gas emissions.
Reputex said the results in the United States would help contribute to a ‘tipping point’ year for international climate action.
“Following the US election in November, and the recent Senate runoff elections in Georgia – delivering the Democrats control of both houses of Congress – Joe Biden has proposed an ambitious climate agenda, which would return the United States to the Paris Agreement, set a net-zero goal of no later than 2050, and potentially implement carbon border fees or quotas on carbon-intensive goods,” Reputex said.
“As a result, 2021 shapes as a key year for global momentum on climate action, with the UNFCCC’s postponed Conference of the Parties (COP 26) – now to be held in November 2021 – likely to represent a tipping point for international pressure and local action.”