Carbon Market Model

Our client needed to develop a carbon credit strategy and implementation plan to manage their financial exposure under the Safeguard Mechanism scheme. This client had substantial liability under the scheme and required consideration of various credit acquisition portfolio approaches. Deloitte supported our client to develop a comprehensive carbon credit management strategy, including:

• carbon market modelling to advise the client on future price and supply trends,
• multi-criteria analysis of portfolio options to identify trade-offs, benefits and risk,
• quantitative analysis of portfolio options against key metrics for investment portfolio performance,
• detailed risk assessment of portfolio implementation,
• final recommendation on optimal portfolio configuration,
• implementation plan, including governance arrangements and delivery milestones.

The outcome resulted in a carbon credit management strategy underpinned by robust quantitative and risk analysis, carbon portfolio parameters for both contracting and direct investment, and detailed implementation plan providing executive level assurance.

Carbon markets are emerging and the ability to manage carbon is viewed as a strategic priority. Recognising that carbon offsets required specialised insights across commercial, technical, and practical elements, we were engaged by a global oil and gas client to examine the commercial opportunities within Australia’s nascent and opaque carbon market. Our client was provided with insights encompassing an:

• Understanding of the carbon market landscape, the regulatory environment, and the underlying policy drivers. 
• Overview of the options to participate directly and indirectly within the market, the benefits and potential risks with strategies to mitigate these risks.
• Examination of commercial models operating within the market.
• Insight to the key market participants, business structure and key personnel to inform potential collaborations.

Through the engagement, the client was keen to build internal capacity and knowledge to ensure inhouse capability. This allowed our client to develop their own carbon strategy, including how to participate and who to collaborate with in the market, and shaping future business growth opportunities in the development of carbon projects.

In 2023, the Australian Government reformed the Safeguard Mechanism. Deloitte was engaged to undertake a review and audit of internal systems, processes and frameworks over the trading lifecycle of a liable entity’s carbon credit procurement. The engagement involved extensive consultation with internal client carbon offset working teams to:

• Understand and assess the processes and frameworks for establishing and evaluating the quality of carbon credits procured. 
• Evaluate the approach undertaken to determine the quantity and quality of carbon credits required to meet regulatory and voluntary carbon credit requirements both in the short-term and long-term.
• Assess the partnerships and relationships with other parties to procure carbon credits.

The result: review of the carbon credit procurement strategy with delivery of insights on the quality of both carbon credit projects and partnerships assessed with clear actions for uplift.

Deloitte is committed to reaching Net Zero by 2030. After taking action to avoid and reduce emissions in our operations, we have identified we will have residual emissions over the next 25 years. We have established that the best way to ensure we reduce our environmental footprint, while contributing to the community is to own, operate and manage our own carbon offset projects. Deloitte Australia have established a carbon offset reforestation program through the purchase of three properties in regional Australia to regenerate native vegetation and sequester carbon dioxide through environmental plantings. The result:

• First-hand knowledge of the practices involved in revegetating properties and developing carbon offset projects to deliver informed advice to clients.
• Reforestation of native species on cleared landing and strengthened relationships with local communities.
• Properties have been designed to generate a series of co-benefits including biodiversity outcomes, Traditional Custodian engagement and procurement and local community engagement.