QUEENSLAND state-owned power producer Stanwell Corporation has carried out the largest known trade of Australian carbon credit units, thought to be worth about $4.5 million, as it seeks to manage the risk to its operations from the carbon price.
The Australian Financial Review reports the trade, brokered by ICAP, provides Stanwell with about 200,000 of the abatement units for settlement from now until May 2013. The units are priced at a small discount to the $23 per tonne fixed price.
Stanwell, which has a carbon liability of about 17 million tonnes a year under the legislation, is also preparing to acquire European Union emissions credits and could be active in that market early in 2013, said Scott Riethmuller, Stanwell's manager of energy trading.
The seller of the Australian carbon credit units (ACCUs), a carbon farmer, has not been disclosed but is thought to be landfill gas and clean energy producer Energy Developments Ltd.
Only Energy Developments and fellow landfill gas producer LMS Energy would have the volume of credits available for the trade. Other carbon farmers, such as CO2 Group and Carbon Conscious which will generate credits from tree-planting programs but only in relatively small volumes in early years.
Under Australia's carbon legislation, ACCUs are issued by the Clean Energy Regulator for greenhouse gas abatement under the carbon farming initiative.
Each unit represents one tonne of carbon dioxide equivalent that is avoided through eligible projects such as landfill gas production, tree planting, burning of savannah grass lands and the destruction of methane generated from pig manure.
The 300 large carbon emitters subject to the carbon price legislation can meet up to 5 per cent of their obligations from ACCUs or Kyoto-compliant carbon credits.
Mr Riethmuller said Stanwell would seek to do similar deals to reduce its financial burden from carbon. "We're always looking to manage that liability through the least cost possible, so to the extent that this gives us a lower cost way to manage that liability we will continue to do these sorts of deals," he said.
"Anything under the fixed price is of value to us," added Tanya Mills, Stanwell's general manager, marketing and trading.
Large emitters of carbon dioxide such as Stanwell became liable for a $23 per tonne tax on their emissions on July 1 with the federal government's introduction of a fixed price on carbon pollution.
The fixed price will continue for two years before switching to a traded price linked to the EU system.
ICAP said the volume of credits in the Stanwell deal "is the largest volume available for compliance to the first year of the carbon tax."
The credits are priced between $22.25 and $22.70 each, a small discount to the fixed price, which acts as an effective cap to the price. Credits delivered earlier are understood to be priced more cheaply than those delivered at a later date.
The price could become of a benchmark for future trades in ACCUs, although the price would likely vary from project to project, depending on its certainty and quality, Mr Riethmuller said.
Bid and ask prices for the credits have moved up within the last few months, said Gary Cox, ICAP's director for energy and commodities in Asia-Pacific.
Mr Riethmuller said Stanwell was actively considering buying EU credits to help satisfy its liabilities once Australia moved to a traded price in 2015. The recent decline in EU emissions prices added extra incentive, particularly given the potential to sell credits back into the European market should Australia's system be scrapped.
"It's definitely something we are looking at right now," he said. "To the extent that prices have dropped over there, they are at attractive levels to start putting some away, or at least looking into it anyway."
