2026 Australian Carbon Market Outlook: Will Regulatory Shifts Push Prices Higher?

The Australasian carbon landscape is bracing for a transformative 2026. As the region navigates a period of significant structural recalibration, market participants are weighing the impact of tighter regulatory baselines against new supply-side flexibilities. While Australia faces a potential demand surge, New Zealand’s market remains in a holding pattern, awaiting critical policy signals for the 2026–2030 window.

A man examining newly planted saplings, with a distant forest and factory in the background. AI generated picture.

Market sentiment suggests a bullish year for Australian Carbon Credit Units (ACCUs), with many analysts predicting prices will climb past the $26.82 (AUD 40) per tonne threshold. The primary engine behind this trend is the Safeguard Mechanism (SGM). As the government implements more aggressive emission baselines, heavy emitters are being pushed toward higher credit acquisition.

Gary Wyatt, Managing Director at Corporate Carbon, highlights the direct correlation between regulation and market value: ‘The tightening of the baselines can drive higher ACCU demand and result in price increases as facilities are required to surrender more of these units.’

The scope of this demand could widen further. The Productivity Commission has recommended lowering the SGM participation threshold from 100,000 to 25,000 tonnes of CO₂e. If adopted during the 2026-2027 review, this would pull a significantly larger group of industrial players into the compliance market.

One of the most debated variables for 2026 is the ‘permanent exit window’ for Carbon Abatement Contracts (CACs). This policy allows project developers to break away from legacy, low-price government contracts—often valued below AUD 15—by paying an exit fee. While this could theoretically introduce 63 million units into the spot market by 2030, the immediate effect on liquidity is a point of contention.

Ian Dobbs, Head of Wholesale at Tasman Environmental Markets, suggests the exit requirements could actually tighten supply in the near term. He notes that the mandate to deliver 25% of contract volume to the government to qualify for the exit might force underperforming projects to purchase units from the open market to fulfill their obligations.

The year also marks a reckoning for credit integrity. The voluntary Climate Active scheme is under scrutiny following greenwashing concerns, which could impact price premiums. Furthermore, the arrival of new methodology drafts, such as Savanna Fire Management (SFM) and Integrated Farm and Land Management (IFLM), is met with mixed reviews. Wyatt remains particularly critical of the latter: ‘In our view, IFLM is now a dead duck and will slowly get pulled to pieces.’

Across the Tasman, the New Zealand Unit (NZU) market is defined by ‘cautious stability,’ with prices expected to hover around NZD 45 ($26.11). Investors are looking for clarity on unit limits and price controls for the 2026–2030 period. Nigel Brunel of Marex New Zealand emphasises that ‘any signal that restores durability, predictability, and commitment’ to the Emissions Trading Scheme (ETS) will be the essential trigger for market movement.