Australia's carbon market reforms get the green light

The election of a new government in May 2022 has sparked new life into Australia’s carbon market.

In August the new government announced plans to increase the country’s 2030 emissions reduction target under the Paris Agreement to 43% below 2005 levels (up from 26–28% previously), while also reaffirming Australia’s commitment to hit net zero emissions by 2050. In early October the government followed up that pledge by launching a consultation into the Safeguard Mechanism crediting framework.

From a low of A$26 in August 2022 prices have surged ~50% to almost A$40 in April 2023 (~US$27) as the market anticipated the impact of the policy measures set to be introduced on 1st July (see Australia's carbon price poised for bull market: Reforms look set to restore trust, significantly increasing ambition).¹

ACCU spot price, AS$ per tonne

In late March the Safeguard Mechanism (Crediting) Amendment Act 2023 was passed in a series of Parliamentary votes that represent a key stepping stone on the way to launching the carbon market this summer. Negotiations by opposition party The Greens gave them some key concessions, in particular around the treatment of natural gas and the use of carbon offsets, that are likely to increase confidence in the market compared to the governments original proposal.