Federal energy and emissions reduction minister Angus Taylor is facing further calls to delay a controversial overhaul of the Emissions Reduction Fund that has sent Australian carbon credit prices plunging and left carbon traders dismayed by a lack of consultation.
A group of 15 companies and interest groups have issued a joint letter to Angus Taylor, calling for a delay to proposed changes to how the government handles carbon abatement contracts under the Emissions Reduction Fund.
The group includes a number of carbon traders and advisory groups, including South Pole, ndevr environmental, Market Advisory Group, Pollination Group, the Aboriginal Carbon Foundation and the Indigenous Carbon Industry Network.
The group is responsible for around one-quarter of the carbon abatement contracts subject to the Emissions Reduction Fund changes, as well as the majority of ACCU sales in the voluntary market.
Many of the signatories would have seen potential revenues eroded by a crash in ACCU prices triggered by the surprise change.
The proposed change, announced earlier this month, will see the Clean Energy Regulator facilitate a large number of carbon offset projects to not deliver on their Emissions Reduction Fund contracts, allowing them to be sold into the open market.
The effect of the change would see the projects allowed to sell their Australian Carbon Credit Units (ACCUs) into the spot market – rather than delivering the credits to the federal government.
Since the announcement of the change, the open market price of the credits has fallen by around 40 per cent, in anticipation of a flood of credits being released from the contracts.
The group is the latest to criticise the federal government for announcing the change without undertaking any consultation with affected stakeholders.
“Changes were introduced on 4th March without consultation or warning and have been followed by a significant drop in the value of Australian Carbon Credit Units,” the letter says.
“Add to this the lack of operational guidelines, and there remains a high level of market uncertainty amongst industry stakeholders.”
“Uncertainty means proponents must reassess the commercial viability of carbon abatement projects, with many at risk of cancellation or delay. These projects have an important role to play in reducing carbon emissions and provide a valuable source of income to proponents, including farmers and land managers.”
“We are requesting the government defer the proposed changes until 1st July to enable the development of clear guidelines on how any changes will be implemented. This will allow participants to consult on any changes with partners, including Traditional Owners, land managers and institutions providing finance.”
The letter follows a similar call from the Carbon Market Institute, which also called for a delay to the change to allow time for appropriate consultation with the industry.
On Wednesday, carbon market analysts Reputex said they expected Australia’s fledgling market for ACCUs to remain significantly oversupplied for the foreseeable future due to the change.
“The market now faces a mountain of supply to overcome. Depending on the timeline and scale of new demand from corporate and investor buyers, it could take 2-3 years for the market to soak up that surplus, and for prices to recover,” Reputex executive director Hugh Grossman said.
“We now expect a fundamental oversupply to weigh heavily on the market, with prices unlikely to see much light above $30-35/t until we start to see new demand claw back the large surplus of supply,” Grossman added.
The changes to the Emissions Reduction Fund, by freeing the federal government from having to pay for carbon abatement previously subject to contracts, could deliver a wind fall of as much as $3.5 billion to the federal government.
The Clean Energy Regulator has indicated these windfall funds will be reinvested in other emissions reductions initiatives, but it is not yet known what these projects may entail.
