Australia and New Zealand are both navigating the complexities of carbon credit markets as they strive to meet ambitious climate targets while maintaining economic stability. Carbon credits-tradable certificates representing one tonne of carbon dioxide removed or avoided-have become a crucial tool in emissions reduction strategies. However, the effectiveness of these markets depends on regulatory frameworks, pricing mechanisms, and corporate participation.
Australia’s evolving carbon credit market
Australia’s carbon credit market has seen substantial growth, valued at AUD 15.06 billion in 2024, with forecasts predicting it could reach AUD 232.85 billion by 2034. The market encourages businesses to develop new technologies and methods for reducing emissions to generate more credits.
The Safeguard Mechanism, covering 215 of the country’s largest greenhouse gas-emitting industrial facilities, requires these entities to reduce emissions by an average of 4.9% annually until 2030 or purchase Australian Carbon Credit Units (ACCUs) to offset excess emissions. The price of ACCUs has fluctuated, with projections suggesting it could double to AUD 75 before 2035.
Hugh Grossman, executive director of carbon markets research firm RepuTex Energy, describes the current Australian market as a hybrid mix of voluntary and compliance trading. “There is rapidly rising demand in Australia for high-integrity carbon offset schemes as companies seek to reduce net carbon emissions,” he explains.
New Zealand’s Emissions Trading Scheme (ETS)
New Zealand operates a well-established Emissions Trading Scheme (ETS), which covers forestry, energy, industrial processes, and waste sectors. The government sets emissions caps and allocates New Zealand Units (NZUs), which businesses can trade to meet their obligations.
Unlike Australia, New Zealand’s ETS includes the forestry sector, making it one of the few global markets where carbon sequestration plays a central role. However, concerns have emerged over price volatility, with NZU prices dropping from NZD 85 in 2022 to around NZD 60 in 2024 due to policy uncertainty and fluctuating demand.
Innovative approaches shaping the market
Several initiatives are emerging to enhance the effectiveness of carbon credit markets. In New Zealand, Carbon Market Solutions is pioneering carbon trading strategies, including landfill gas offset projects and mangrove restoration efforts to sequester carbon.
Australia is also exploring new approaches, with the ASX Environmental Futures market providing transparent price discovery for ACCUs and NZUs. This initiative enables businesses to hedge against carbon price fluctuations and invest in long-term decarbonisation strategies.
CommBank is supporting carbon farming projects, helping landowners generate revenue through carbon sequestration while contributing to emissions reduction. “Project developers have the opportunity to finance their project through the Australian carbon market and connect with public and private sector entities through the supply of carbon credits,” explains Lachlan Finch, Global Commodities and Carbon Business Associate Director at CBA.
Looking ahead
Australia and New Zealand’s carbon credit markets are at a pivotal moment. Strengthening regulatory oversight, improving transparency, and ensuring price stability will be key to maintaining market confidence. As both nations refine their carbon trading frameworks, businesses and policymakers must collaborate to ensure these markets drive meaningful climate action rather than serving as mere compliance tools.
References
https://www.expertmarketresearch.com.au/reports/australia-carbon-credit-market
