The certificate market

This page describes the market for energy savings certificates, including information on certificate pricing and penalty rates

What are energy savings certificates?

An energy savings certificate is a tradable certificate created under Division 7 of Part 9 of the Electricity Supply Act 1995. Each energy savings certificate represents the equivalent of 1 tonne of CO2-e resulting from energy savings activities.

Who purchases energy savings certificates?

People interested in buying energy savings certificates include:

  • Liable Entities, who are required under NSW legislation to acquire and surrender energy savings certificates or pay a penalty. The number of energy savings certificates required by a Liable Entity depends on their compliance obligations.
  • Intermediary agents who might subsequently sell the energy savings certificates to Liable Entities.
  • Organisations or individuals interested in voluntarily purchasing offsets to manage their carbon footprint.

Liable Entities under the Energy Savings Scheme include all NSW electricity retailers and certain generators.

Review the list of Liable Entities

Certificate pricing and penalty rates

The price of certificates varies due to supply and demand and can fluctuate considerably depending on market conditions. Historically, ESCs have traded at prices around $14.00 - $32.00 (The Green Room reports, NGES.com.au).

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There is no maximum price for a certificate. However, the penalty price acts as a practical maximum price - if a Liable Entity does not surrender the required number of certificates in a given year (excluding any shortfall it is allowed to carry forward to the next compliance year), it must pay a penalty.

The penalty rate is set annually, and for the 2014 compliance year it is $25.97 per certificate and is not tax deductible. Once tax impacts are taken into account, this is equivalent to $37.10 per certificate.

Some organisations such as the Australian Financial Markets Association (AFMA) and a few environmental brokers provide regular updates on certificate wholesale market prices. Subscription to these services typically involves a fee.