The state of the ACCU market
Australia’s regulated carbon market has entered a phase of genuine maturity, though not without friction. Total Australian Carbon Credit Unit (ACCU) issuance for 2025 reached approximately 19.8 million units, placing the year toward the upper end of the Clean Energy Regulator’s guidance range. The reformed Safeguard Mechanism, now in its third year, has become the dominant demand driver, with covered emissions across 219 facilities declining from 135.9 Mt CO₂-e in the 2023/2024 financial year to 132.7 Mt CO₂-e in the 2024/2025 financial year, and baselines continuing to tighten at 4.9% per year toward 2030. Generic ACCUs have traded mostly in the $30–43 range, with premium units, particularly those with biodiversity or Indigenous co-benefits, attracting prices of A$50 and beyond.
The voluntary market presents a more complex picture. Voluntary ACCU demand is currently growing at a slower pace than compliance demand, though analysis forecasts voluntary demand could exceed 7 million units per annum by the late 2030s. High-profile corporate exits, most notably Telstra’s June 2024 decision to move away from purchasing carbon credits in favour of direct decarbonisation investment, and withdraw from Climate Active certification, have attracted scrutiny. With mandatory Australian Sustainability Reporting Standards reporting and the further alignment of varying standards such as Greenhouse Gas Protocol and Science Based Targets Initiative, we expect the void created by the Climate Active exit will be replaced by a more globally aligned standard in the coming years, ultimately driving far greater aggregate uptake.
This has been further compounded by the recent announcement to wind the Climate Active program down at the end of the 2026/2027 financial year. Despite these headwinds for narrative driven purchasers, the broader trend points toward sustained engagement, as May 2025 trading volumes nearly doubled those recorded in May 2024. These trends reflect a steadily expanding market with compliance and voluntary buyers increasingly competing for the same high-integrity supply.
Challenges in credit distribution and income realisation
Market structure and pricing segmentation
For most of the ACCU scheme’s history, supply was previously dominated by Landfill Gas, Avoided Deforestation, and Human-Induced Regeneration (HIR). HIR is now closed to new registrations, and 2025’s record total of 21.64 million ACCUs was achieved despite that structural constraint. The next generation of supply is unambiguously nature-based, and current pricing already reflects the shift, with prices for ACCUs generated under different scheme methods as follows:
- Environmental Plantings at $56;
- Soil Carbon at $42;
- Plantation Forestry at $40;
- Savanna at $36.75; and
- Generic ACCUs at $36.40.
Soil Carbon, whereby ACCUs are generated by increasing carbon stored in soil, is the standout method of the scheme and is one of the few where carbon income is a co-benefit of improved productivity rather than a trade-off against it. The rotational grazing and pasture management practices that qualify land for crediting also rebuild water infiltration, reduce fertiliser dependence and increase carrying capacity. Properly managed grazing develops soil biology to improve carbon, rainfall infiltration and fertility, allowing more livestock to be run for improved economic returns. For a cattle operation already considering land management improvements, entry into the ACCU scheme provides genuine financial returns on top of an existing productive asset. The sector recorded its biggest annual rise in project area in 2025 at 282,302 hectares. As a removal credit, Soil Carbon also increasingly appeals to corporate buyers with science-aligned procurement strategies, a distinction becoming apparent in competitive offtake markets.
Plantation Forestry, trading at around $40, addresses two national problems at once. ACCUs are generated under the Plantation Forestry methodology through the planting or maintaining of forestry.
Australia’s softwood plantation estate has stalled for over a decade, and hardwood plantations have declined by 40%.
This has constrained domestic timber supply for construction and packaging at a time when housing delivery is a national priority. Research shows new plantations become economically viable at a carbon price of approximately $40 per tonne, with modelling pointing to significant additional timber flows at that price level. Carbon revenue is helping underwrite the long-gestation investment needed to restore domestic supply, with the ACCU method simultaneously delivering market sequestration and helping solve Australia’s timber shortage.
Environmental Plantings (EP) projects earn ACCUs through the planning of trees to achieve forest cover. ACCUs generated by EP projects command a premium and trade circa $56+ on the strength of biodiversity co-benefits, but a significant proportion of EP credits are held by the emitters who funded underlying projects and will never reach the secondary market, constraining accessible supply regardless of issuance volumes for some time.
Integrated Farm and Land Management (IFLM), designed to consolidate vegetation, soil and regeneration activities under a single framework, continues to create development delays. While the Department of Climate Change, Energy, the Environment and Water has acknowledged that there are ‘considerable technical issues yet to resolve’ and like HIR and Savanna before it, projects touching native title land will require negotiated Indigenous Land Use Agreements. Until legislated, the supply gap left by HIR’s closure remains a structural market risk.
The recent finalisation of two new Savanna Fire Management methods, crediting sequestration in living biomass and standing dead wood for the first time, is the most consequential near-term supply event. How the market absorbs a potential issuance increase while preserving the Indigenous co-benefit premium is a question addressed directly in the sections that follow.
Offtake agreements: who they serve?
In theory, offtake agreements provide a project developer with price certainty and a buyer with supply assurance. In practice, the terms of most agreements in the market reflect the strength and the bargaining position of whoever holds the most information, and that is rarely the landholder or Traditional Owner on the other side of the table.
Buyers in the regulated ACCU market span a wide spectrum: large corporate Safeguard-liable entities managing compliance obligations, financial institutions and carbon funds building long-dated portfolios, sustainability-driven corporates seeking voluntary retirement, and, increasingly, institutional investors deploying capital into natural capital as an asset class. Each brings different credit quality, different security requirements and fundamentally different motivations, and the structure of an offtake agreement should reflect those differences.
For project developers, the critical variables are counterparty credit quality, contract tenor and whether any prepayment is available. Prepayment, where a buyer advances capital against future credit delivery, can be transformative for project viability, effectively functioning as project finance. But it comes with strings. Buyers offering prepay will typically require step-in rights, delivery guarantees, price discounts of 15–25% below prevailing spot, and in some cases, charges over project assets or trust structures as security. The quantum of prepayment a buyer will extend is directly linked to their assessment of credit risk, the developer’s track record, the method’s integrity profile, and the vintage and volume certainty of projected issuance.
Long-term offtake agreements particularly those with prepay, price floors and delivery penalties, are financially complex instruments that require independent financial advice on the developer’s side.
Landholders and emerging project developers who sign them without specialist counsel routinely discover that the agreement serves the buyer’s portfolio optimisation far more than their own income objectives. Getting the structure right at the outset can determine whether a project delivers its financial promise or transfers that value elsewhere
Managing buyer and seller expectations — the price is never just the price
The generic ACCU spot price is widely quoted and widely misunderstood. At $36.40 it represents a floor and a reference point, not a procurement price for anyone serious about acquiring high-quality, nature-based credits. Understanding why requires looking at both sides of the market simultaneously, because the supply constraints and seller behaviours that frustrate buyers are rational responses to project economics that most buyers have not taken the time to understand.
The cost of production across the new method landscape is the starting point. Soil Carbon, Environmental Plantings and Plantation Forestry all carry development, monitoring and verification costs that sit comfortably north of $30 per credit before any return to the landholder. A project developer accepting generic spot pricing on these methods is not breaking even — they are subsidising the buyer. That reality is reshaping seller behaviour in ways the buy side has been slow to recognise.
Not all issued credits are available credits. Soil Carbon projects carry reversal risk, the possibility that sequestered carbon is lost through drought, changed management or fire, which means prudent developers retain a buffer of issued credits as insurance rather than selling them immediately into the market. Forestry developers have a different dynamic and with timber revenue as a parallel income stream, they can afford patience, allowing them to choose to hold credits until pricing justifies release rather than selling under pressure. EP projects present a structural supply illusion, large volumes appear on the register, but the majority are owned by the emitters who funded the underlying projects and will never be offered to the secondary market.
Future price guidance compounds the confusion. Forward curve modelling and price forecasts circulate widely in the market, and buyers frequently anchor their expectations to projected prices that assume continued policy support, method integrity and demand growth. Sellers who understand their own project economics are increasingly unwilling to lock in forward prices based on a buyer’s model.
The practical implication is straightforward, high-quality carbon is not an over-the-counter commodity. The generic price is the starting point of a conversation, not the conclusion of one. The premium above generic, whether for removal attributes, co-benefits, vintage, or method integrity, is best determined through direct negotiation between informed parties. Buyers who approach that conversation through a markets desk rather than across a table consistently overpay for low-quality credits or fail to secure the high-quality supply they need.
Recommendations
For every stakeholder, poor outcomes are created from entering the market without appropriate professional guidance.
Developers should stress-test method selection against realistic cost-of-production modelling before committing to a project structure. Understanding tenure, native title interests, ILUAs and carbon rights must be mapped before a project is registered, not after. Engaging legal and financial advisers with direct ACCU scheme experience is the best protection available.
Landholders and Traditional Owners should never sign an offtake agreement, aggregation arrangement or project participation deed without independent legal and financial advice, as the documents prepared by an opposing party have always been prepared in their best interest. There are also risks in long-term agreements with delivery obligations, price floors and penalty clauses are financially complex instruments and these clauses should be carefully analysed.
Intermediaries and aggregators operate in a largely unregulated space. That places the obligation on the parties they deal with to apply scrutiny, but it also places a professional and reputational obligation on intermediaries themselves to ensure the economics they present are honest, the agreements they structure are fair, and the clients they represent have genuinely understood what they are signing.
Buyers should approach procurement as a relationship, not a transaction. Generic spot pricing is the starting point. High-quality, nature-based credits with genuine co-benefits require direct engagement with developers and landholders, forward planning, and a willingness to pay a price that reflects real production costs. Buyers who chase the cheapest available credit will increasingly find they have acquired credits that their own sustainability teams cannot defend.
Across all four groups, the market has matured beyond the point where broad experience in land, finance or sustainability is sufficient preparation. Carbon law, carbon finance, Indigenous engagement and market pricing are each specialist disciplines. The professionals best placed to help a developer are rarely the same professionals best placed to help a buyer — and neither is well served by the same adviser trying to do both. In a market where a single offtake agreement can define a project’s financial outcome for twenty years, the cost of the right advice is never the largest number in the room.
With thanks to Guy Dinkinson for his contributions to this article
Guy is a recognised voice in the Australian carbon markets community and a regular contributor to industry forums on pricing, market structure and the future of nature-based supply.
Guy brings over 30 years of financial markets experience, including a career as a bank treasurer, before spending the last seven years building Clima into a specialist practice focused on the regulated Australian carbon market. His unique value is a practitioner’s understanding of all sides of the market, the project economics that determine what credits actually cost to produce, the pricing dynamics that determine what they are worth, and the pitfalls that catch those who arrive in the market with enthusiasm ahead of experience.