Oz Carbon Prices Collapse, So Gov Will Let Business Break Contracts, Profit Through Private Markets

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As a whistleblower alleges major failures in Australia’s carbon credit scheme, analysts say a plunge in the price of credits, triggered by a contentious change by the emissions reduction minister Angus Taylor, could last for years. Earlier this month, Taylor announced landholders and other businesses with contracts to sell carbon credits to the government would be permitted to break those deals and instead sell them at a higher price on the private market.

The move triggered a plunge in prices on the market for Australian carbon credit units (Accus), prompting participants to seek legal advice over an intervention that handed some investors in taxpayer-funded schemes a $1bn-plus windfall by allowing them to cash credits out early. After reaching $57.50 per unit – which represents a tonne of carbon-dioxide abatement – in January, Accu prices fell by a quarter in a day after Taylor’s announcement on 4 March. They recently traded at $31.

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Polly Hemming, a researcher at the Australia Institute warned last year the government was bound to intervene in the market, only to have the Clean Energy Regulator publicly dismiss the prediction. “We talk about the ‘carbon market’ in Australia, but it’s not a market in the true sense of the word,” Hemming said. “It’s designed, regulated, funded and entirely controlled by government.” “Up until now the aggregators and developers have been quite happy with this arrangement and have been making a profit from this publicly funded non-market,” she said, adding the intervention was partly intended to support the gas sector.

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Instead of being guaranteed $12 a credit, businesses with government contracts can profit provided the market price is above that sum plus a $12 per unit penalty they must pay the commonwealth for breaking the deal. Renew Economy, a specialist publication that focuses on carbon markets, reported Taylor’s intervention could deliver windfall profits of about $1.3bn to the companies involved, prompting some investors to seek legal advice. “The mechanism is not designed for a situation where the seller (the holder of the credit) is able to perform its delivery obligation but simply chooses not to,” the managing partner of Marque Lawyers, Michael Bradley, said in legal advice to one group of market participants, obtained by Guardian Australia.

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https://www.theguardian.com/environment/2022/mar/24/australias-carbon-credit-scheme-could-take-years-to-recover-from-price-plunge-analysts-say

[jimfields33]

1. Doesn't make sense.

The whole buy carbon credits is dumb. You are still polluting but just feel good about it, by writing a check. Whoever thought of this was an idiot to begin with.

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2. Even if carbon markets worked (and they don't) . . . .

. . . . how long would it take for some eager brokers and quants to figure out how to slice, dice, leverage, package, sell and short-sell carbon? Not long.

What would matter in such a scenario? Money, lots of it, right now, and more next year.

What wouldn't matter one little bit? Whether carbon markets actually worked in the physical world, whether they cut carbon output, or even slowed the rate at which emissions increased.