The regulator released the results of the first ERF auction last week, announcing that more than 47 million tonnes of greenhouse gas abatement, in the form of ACCUs, had been contracted from the market for delivery over the next 10 years.

The average price of abatement was $13.95, with the regulator entering into contracts to the value of $660 million.

While the auction outcome was widely seen as positive for both industry and the government, analysis by RepuTex suggests that many companies appear to have contracted at significantly lower prices, failing to capitalise on the higher contract prices available.

RepuTex executive director Hugh Grossman noted that analysis indicates large proponents took a "safe" approach in the first, rather than maximising their returns.

"Our analysis suggests that the low-cost forestry and waste players took a conservative approach with their bidding strategies. This was driven by the desire of existing projects to secure long-term contracts before industry competition overwhelms the market," Grossman said.

"High-volume, low-cost projects appear to have favoured the certainty of long-term contracts rather than maximising the value of their abatement.

"Some participants could be perceived to have "left money on the table", however these sentiments are generally outweighed by the relief of long-term pricing certainty.”

According to RepuTex, a large portion of the market is estimated to have entered into "moderate priced" contracts, suggesting companies understated the benchmark price set by the regulator, and therefore may have missed out on greater returns.

"The large volume of abatement we estimate that was contracted at lower prices suggests a mismatch between the market and the Regulator, with proponents underestimating the maximum amount the Regulator was willing to pay for emissions reductions,” Grossman said.

"Subsequently, the regulator was successful in contracting a large amount of abatement, with our estimates indicating that firms generally bid low, failing to capitalise on higher contract prices available.”

RepuTex believes this will likely change if industry enters the next auction.

"As high emitting companies begin to participate at the next auction, we anticipate a much higher degree of sophistication will enter the market. These companies are familiar with trading and have the intelligence to exploit market conditions in their favour," Grossman said.

He also noted that a higher benchmark price than market expectations may encourage a rush of industry participation in the next auction.

"The Regulator has shown a willingness to set a high benchmark price as it seeks to kick-start interest in the ERF – and this may create a rush of ACCU supply over the next 12 months – suggesting that industry will enter the market sooner rather than later,” Grossman said.

"To a degree, the outcomes of the first auction are a cautionary tale for industry, with the Regulator's tolerance for high contract prices suggesting considerable scope for firms to extract greater value for their abatement if they are sophisticated in understanding market dynamics and patient enough to optimise value."