(17 June 2025 ā Australia) NAB has forecast that the carbon offset market will mature rapidly as institutional financing and favourable government policy underpin longer term investment certainty.
NAB predicts that Australiaās carbon market is set to follow the renewables pathway to critical mass by unlocking institutional lending capacity and project financing. The group is predominantly funding carbon projects through mortgage lending secured by property currently with these loans generally serviced through both agricultural and carbon cash flows.
The scheme encourages farmers and landholders to use sustainable agricultural and vegetation management to generate additional income streams via ACCUs, or to offset their own emissions. NAB finds that carbon market participants believed that bank debt for carbon project development was generally not yet efficient or available at an institutional scale.
Debt financing for carbon projects today is primarily made up of prepayment structures, where a counterparty provides an upfront payment to secure future ACCU supply at agreed prices. Equity financing is also used whether at a project, corporate or fund level.
āNAB is interested in supporting customers with greater choice in funding and risk management solutions for carbon projects. As weāve seen through the bankās global support for renewables energy generation, taking a project finance-style approach can be effective in achieving a step-change in industry outputā stated NAB Global Head of carbon trading, Ben Jackson.
The bank acknowledged that the integrity of the ACCU scheme had been called into question, with criticsĀ arguingĀ that offset schemes could not undo the environmental damage inflicted by burning fossil fuels. An independent review found the ACCU scheme to be fit for purpose granted measures to clarify governance and transparency would be pursued further.
āThe advent of proponent-led methodologies in the ACCU Scheme is likely to lead to more innovative carbon project opportunities and weāre eager to continue evolving NABās capabilities in this sector to better service our customers and the Australian carbon marketā Jackson added.
āThe carbon market will evolve into an infrastructure-type market which will be very similar to renewables in the way it is financed. We are probably five years away from the carbon market getting to that point though, and another five to ten years away for the nature repair marketā commented Silva Capital Co-Managing Director of Carbon Assets, Raphael Wood.