Angus Taylor has allowed holders of early carbon credit units to escape their contracts

Angus Taylor has allowed holders of early carbon credit units to escape their contracts. Picture: Annabel Moeller

Energy Minister Angus Taylor has again intervened in Australia’s carbon market with measures to increase supply with zero carbon reduction, just as the market was hit with concerns over the Russian invasion in Ukraine.

Taylor, with minimum consultation, has allowed holders of early carbon credit units to escape their contracts with the government to sell at a higher price.

The impact will mean more carbon units are traded with zero links to carbon reduction, which was meant to be the aim of the scheme.

It is the third time in a year the government has intervened in the market, an extraordinary comment on its support for free markets and the carbon market in particular.

The spot price for carbon units fell as low as $29 a unit on Friday after the news, from a high of over $50 a unit before the Russian invasion of Ukraine and an overnight price of $47.

The intervention helps long-time holders of carbon units who acquired the units for as low as $10 or less several years ago and reportedly was aimed at preventing mass defaults as these people attempted to break their contracts.

Just who owns the units – farmers, developers or offset users – is not known but the potential beneficiaries from a lower market price are the big emitters who will pay less for their offsets and the aggregators who may be short on contracts to supply the market.

The big aggregators include GreenCollar – which partly owns Corporate Carbon and was established by Matthew Warneken.

In the last 12 months the government has intervened by requiring Australian companies to source at least 20 per cent of their offsets in Australia and putting in new limits to ensure farmers didn’t devote too much land to carbon farming.

For a so-called government of free enterprise, Taylor’s extraordinary moves show complete contempt for the market. The sad irony is good farm management is the major provider of farm-based carbon credits in Australia and Australia’s major problem is not demand – which has skyrocketed globally – but supply.

The trick is how to get more farmers involved and the surest way to stop that is to destroy the credibility of the market as Taylor is attempting to do.

This is the same minister who copied from the socialist textbook in protecting oil refineries owned by Viva and Ampol by underwriting their losses and handing them the upside from higher prices.

The carbon credit unit prices have more than tripled in the last 12 months before falling to $47 a tonne before Taylor’s extraordinary surprise intervention.

Australian carbon credits have attracted global support because of their one-time integrity, but meddling by the government clearly threatens this reputation.

In a statement, Carbon Market Institute chief executive John Connor said: “We are concerned about the message this sends to the market about the ability for government intervention without transparent and public consultation at any point in time if market dynamics change.

“The government needs to be clear about the intended use and timing of how the exit payments will be recycled and should have linked this to stronger corporate investment requirements under strengthened safeguard mechanism responsibilities and stronger national emission-reduction commitments,” he added.

“The changes, while coming with some guardrails, could deliver up to 100 million ACCUs at a value of up to $2.4bn to corporate or other private buyers over the next decade, based on likely ­market prices required to facilitate exit.”

The government says that over 75 per cent of the abatement it holds under fixed delivery contracts is priced under $13 per ACCU, well below current market prices.

To date, fixed delivery contract holders have met their delivery obligations with 13 million ACCUs supplied in the last financial year alone and deliveries across the contract portfolio are tracking 6 per cent ahead of schedule.

GreenCollar chairman Grant King, an adviser to Taylor, was unavailable for comment.

Australia accounts for 4 per cent of global carbon emissions and potentially 7 per cent of carbon credits, which explains the rush to fill the gaps.

The big financial institutions from Macquarie to NAB and the Commonwealth Bank are chasing ways to support the market. The central problem in the eyes of Wilmot Cattle Company boss Alasdair Macleod is “how to mobilise the farm sector”.

Macleod is a believer and has just snapped up a new property, Paradise Creek outside Inverell in NSW, backed by a NAB green loan to expand his territory and unleash his management team on more land.

His Macdoch Foundation is also supporting a project called the future of farming, aimed at collecting data on natural capital and farm profits, which will help boost farm sector involvement.

The floods wreaking havoc in Queensland and NSW are a timely reminder of the need for action but, as GreenCollar’s James Schultz is fond of saying, there no magic wand; it’s a question of hard work to build the credits.

Barclays figures the voluntary carbon market globally will be worth $US250bn ($341bn) by 2030 and four times that by 2050.

CBA is geared up to the revolution in every conceivable way, from personal loans at low rates for people who want to install batteries in their home to Andrew Hinchcliff’s team in the institutional bank. With the help of commodities boss Alex Toone, Hinchcliff sees the bank’s balance sheet supporting homeowners, farmers, companies, carbon credit traders – and in the process helping produce low-cost abatement.

As with NAB, CBA is working the CSIRO and others in the carbon club to gather data to help clients. NAB’s David Gall notes his CarbonPlace – a global trading platform for the voluntary carbon market – is in a rare space, with no direct competitor focused on settlements or supported by financial institutions.

He defends criticism of its blockchain base given blockchain-backed bitcoin is highly energy-intensive. Carbonplace is a private market. “It uses an energy-efficient distributed ledger, which is an excellent technology for hosting a book of record for ownership of carbon credits. The blockchain element is to create a single source of record of ownership in the voluntary carbon market,” he says.

The good news is the same techniques to create credits is simply good farm management and also translates into good carbon creation on the right land, which can then be monetised.

The farm management means good rotation of herds and crops, the right vegetation and hopefully plenty of water.

Measurement is one gold rush being chased by a range of players, including Terry McCosker at Carbon Link, Philip Mulvey’s Carbon Count and the Tiverton-backed Downforce Technology, which is a satellite-based technique developed at Oxford University and part of the armoury employed by NAB’s Gall.

NAB and Downforce are also exploring how the data gained can help inform NAB’s Carbonplace trading platform. The trading platform is also a crowded space, with soon-to-be-listed Xpansiv claiming global leadership.

Singapore is also building its own platform backed by Temasek and DBS, and the Australian Clean Energy Regulator will, at some point, be ready with its new exchange.

The CER called for tenders last year and a shortlist of 13 were selected to help.

The list, which includes the ASX, ICE, Xpansiv and CHiX, was expected to be narrowed down in November and then February.

No details are available of what happens next, but given Taylor’s behaviour such lack of information is unsurprising.