After a brisk consultation period, the Federal Government promptly produced legislation for what it dubbed the Enhanced Renewable Energy Target (RET). Having been introduced to Parliament ,the legislation has been referred to a Senate Inquiry which will report back on 10 June. The Government will be seeking to realise prompt Opposition support for the new scheme. In recent weeks the spot Renewable Energy Certificate (REC) market has fallen below $40 for the first time since the Enhanced RET was announced on 26 February 2010. The spot market appears now to have stabilised at $38.00, having traded horizontally for close to two weeks. The drop in prices has been ascribed to both political uncertainty and a continued growth in the amount of surplus RECs in existence.

The spike in trading volumes seen in the early part of 2010 has continued across April and May with approximately 900,000 RECs changing hands in the brokered spot market alone each month.

With the Federal Government having conceded delay in the implementation of the Carbon Pollution Reduction Scheme, the New South Wales Greenhouse Gas abatement scheme (GGAS) has experienced a revival. The NGAC market is set to expire when a carbon price is in operation in all jurisdictions of the National Electricity Market . Given the CPRS may not be introduced until 2013, participants from both sides of the market now appear set to possess exposures for the latter part of 2011 and all of 2012. This has resulted in the return to trading and mild price increases across spot and forward vintages. By the beginning of June the spot NGAC market had traded up to $5.00.

Comments written, and reflect market and industry circumstances, as at 1 June 2010.