Carbon markets reduce greenhouse gas emissions through the purchase and trade of offsets produced by carbon reducing activities. Through the participation of governments, companies and individuals investing in environmental and carbon reduction projects, carbon markets work to balance out or ‘offset’ any unavoidable emissions in their value chains. The above describes voluntary carbon markets, where companies and individuals invest by choice to reduce their carbon footprint and enhance their ESG and net zero credentials. There are also compliance markets, where large emitters are obligated to purchase credits if their emissions exceed the cap set by the market regulator. The Clean Energy Regulator’s (CER) Safeguard Mechanism is an example of a compliance market.

ACCU stands for Australian Carbon Credit Unit. One ACCU represents one tonne of carbon dioxide equivalent sequestered (stored) or avoided by a project. ACCUs are issued by the Clean Energy Regulator (CER) to value greenhouse gas abatement activities undertaken as part of the Australian Government’s ACCU Scheme.  The CER is an independent statutory authority established by the Australian Government, and the issuance of ACCUs is governed by the CFI Act 2011, the Carbon Credits Regulations 2011 (Carbon Farming Initiative Regulations 2011), and the Carbon Farming Initiative Rule 2015 (CFI Rule 2015).

A whole lot of regulatory requirements must be satisfied before a project can be declared an ‘eligible offsets project’, and on top of that, we’ve got the highest standards in terms of how our outcomes are governed, measured, managed, audited and verified.

1. Each project is subject to robust scientific measurement and must have an approved methodology
2. It must deliver positive environmental outcomes that wouldn’t happen naturally, without any negative environmental or social side-effects
3. It must comply with strict eligibility requirements, including third party auditing and governance
4. GreenCollar, as the organisation responsible for the project must report to the CER about progress and abatement achieved

Like other commodities (eg gold, wheat, copper, cotton etc), ACCUs can be bought and sold in the secondary market. The price of an ACCU is driven by supply and demand so as demand for ACCUs increases, prices go up. Prices are also reflective of the quality and integrity of the projects that generate an ACCU. For example, the ACCUs we buy are generated by nature-based projects that deliver additional benefits such as improvements in natural habitat and biodiversity so they are priced at a premium.

The process works somewhat like a tender process. Eligible carbon reduction projects bid for a contract to sell their ACCUs to the CER, who run auctions to match buyers (the Federal Government) with sellers (project developers) . A primary objective of the CER is to select projects that offer the largest amount of carbon reductions for the least amount of funding. This maximises the amount of taxpayer-funded offsetting that can be achieved.

Once issued ACCUs can be traded within the voluntary market and sold to individuals, Governments or corporates that want to offset their own emissions. An ACCU must be surrendered to count towards emission reduction targets. When surrendered, ACCUs are retired from the market and are not available for resale. By choosing to offset your emissions, you are choosing to purchase and retire ACCUs and are therefore making a quantifiable difference to the amount of CO2 in the atmosphere.

Like other commodities (eg gold, wheat, copper, cotton etc) ACCUs can be bought and sold in the secondary market. The price of an ACCU is driven by supply and demand so as demand for ACCUs increases, prices go up. Prices are also reflective of the quality., impact and integrity of the projects that generate an ACCU. For example, our ACCUs are generated by nature-based projects that deliver additional benefits such as improvements in natural habitat and biodiversity, so they are priced at a premium.

But carbon market investment is about more than direct financial returns. According to Climate Impact Partners’ 2024 Annual Fortune Global 500 Report, 45% of these – the world’s largest – companies plan to be net zero by 2050 and 42% of companies explicitly state they will use carbon credits to meet a carbon neutral or net zero target.  The report also found that companies committed to using carbon credits are almost twice (1.7x) as likely to have a near term Science Based Target and three times more likely to have a net zero target for their entire value chain (including Scope 3) than companies that are not carbon neutral or do not plan to be by 2030.

GreenCollar is one of the largest project developers in the Australian carbon market with over 200+ projects covering over 10 million hectares, contracted to generate over 132 million* ACCUs.  ACCUs are generated from avoiding clearing of native vegetation or regrowth of native vegetation in regional Australia.

On every project, GreenCollar partners with land managers and Indigenous custodians who employ land and fire management strategies on-farm and on-country, to reduce or actively absorb carbon and other greenhouse gases. As well as our work with project developers, GreenCollar uses extensive market knowledge to lead industry research programs and assist in the pioneering of other new environmental markets, such as the Reef Credit and plastics credit schemes.

(*Includes 40 million ACCUs delivered as at 19 September 2024.)

Participation in the Australian carbon market is relatively simple and can be achieved by contacting project developers such as GreenCollar. GreenCollar has a wealth of expertise on facilitating quality carbon reduction projects and maximising investment returns. We work with land managers, Indigenous groups and Natural Resource Management organisations to develop high-value, high-integrity, high impact projects that offer comprehensive ESG benefits for investors.

A key risk when purchasing offsets from carbon projects is that the project fails to deliver quality, high integrity climate solutions, impacting the credibility of the participating company’s brand and reputation. But while these low-quality products are available, industry transparency is growing, and regulation surrounding carbon farming nature-based project eligibility is robust.

Companies choosing to meet ‘net zero’ targets with low-quality offsets are being increasingly exposed as quality and transparency improve within the industry, reducing the opportunity for greenwashing. Likewise, for companies seeking ‘net zero’ status, there is a verification process that may be adhered to.

Climate Active’s Carbon Neutral Standard (CACNS)—previously NCOS—ascertains the credibility of carbon neutrality claims made by public and private enterprises. Though currently a voluntary standard, the consideration given to the quality of carbon offsetting programs and projects is becoming more important as the carbon market continues to grow. This quality verification will likely increase as the importance of transparency, integrity, impact and quality increases .

While ESG benefits to investors are important, the core objective of carbon markets is to actually quantify and reduce the carbon dioxide that is being emitted into the atmosphere. As of 17 March 2024, the CER estimates that over 80 million tonnes of emissions has now been reduced under the ACCU Scheme (previously the Emissions Reduction Fund, or ERF).

The Clean Energy Regulator’s Australian carbon market scheme is supported by a raft of measures to ensure continued integrity of the ACCU Scheme . GreenCollar’s own projects are developed to deliver a suite of environmental outcomes in a single project. These benefits include preservation of vulnerable habitat, biodiversity enhancement, significant improvements to water and soil quality as well as emissions reduction.