The price for carbon credits in Australia has plummeted 40 per cent to $30 a tonne, after the Commonwealth’s Clean Energy Regulator made a surprise ruling that government-held credits could be sold on the open market.
The spot price for carbon offsets was trading at $47 on the spot market immediately before the regulator’s change caused the price plummet, but experts expect the market to recover – although by how much remains a matter of debate. It was a necessary move, according to the regulator, because the spot price on the open market had jumped 200 per cent in the past year and companies that currently hold around $1.3 billion worth of fixed-price 10 year contracts would have defaulted on their contracts to sell at higher prices anyway.This would have forced the regulator to pursue expensive court cases chasing damage payments for broken contracts and would likely have resulted in a flood of carbon credits onto the market.
“ERF fixed delivery contract holders have always had the ability to default on their contracts to take advantage of higher private market prices.”