Australia: Land of many carbon prices

There is no national price on carbon in Australia at the moment. However, there are number of implicit and sectoral carbon prices. This profusion of carbon prices provides opportunities and challenges to carbon mitigation and economic growth. Commercially, there are the potential for carbon price arbitrage (if you can get the linkages and carbon rights settled in your favour).

The list, as I see it, of current carbon prices includes:

• Traded Australian Climate Change Units (ACCUs)
• Renewable energy certificate prices (STC AND LGC)
• Emissions reduction fund auction price
• International carbon prices that impact imports and exports

ACCUs and Renewable Energy Certificate Prices

The most prominent carbon prices are the traded ACCUs which are required to be purchased by high emitters under the Safeguard Mechanisms and used in voluntary carbon offsetting.

Separately, Renewable Energy Certificates – Small Technology Certificates (STCs) and Large Generation Certificates (LGCs) generated by renewable energy and required to be bought energy retailers as proportion of their non-renewable energy sales.

Current prices are shown below.

The chart are shows that ACCUs last traded at $16/tonne of carbon.

The LGC and STC prices are $36 and $50 per MWh respectively. Converting the LGC and STC prices to $/tonne is done by factoring the price by the amount of emissions per MWh of grid electricity that the renewable energy generation offsets. The average carbon intensity per MWh of grid electricity across the National Electricity Market is 0.74. So the price per tonne of carbon per STC and LGC is $48 and $67.

Emissions Reduction Fund auctions

The Emissions Reduction Fund (ERF) auctions are a national program to fund a range of emissions reduction projects

• Vegetation
• Landfill and waste
• Agriculture 
• Savanna burning 
• Energy efficiency
• Transport
• Industrial fugitives
• Facilities

The average price over the nine auctions of the ERF was $12.02 per tonne.

International carbon prices

There are range of carbon prices across the globe that impact the costs of imports and exports for Australia.

The strength of the impact of these carbon prices can be examined through the two-way trade linkages.

The majority of our major trading partners have a carbon price. The carbon price of the RGGI (USD$8) and California (USD$17) having linked with Quebec and Ontario) are major components of the US economy. South Korea (currently around USD$24 per tonne), New Zealand (USD$16) and the UK as part of the EU-ETS (USD$27).

Interestingly China, our biggest trade partner, has a range of carbon prices due to its pilot schemes. These prices range from USD$3-USD$13 per tonne as show in the chart below.

Carbon prices will therefore change the costs of production in these countries, increasing costs for goods exported to Australia.

Summary

• Traded Australian Climate Change Units (ACCUs) – $16/tonne
• Renewable energy certificate prices (STC AND LGC) – STC $36/tonne and LGC $50/tonne
• Emissions reduction fund auction price – $12.02/tonne (average)
• International carbon prices that impact imports and exports – $3-$27/tonne