The specifications are:

CORSIA phase 1, $/tCO2e (CB-CC-0015)
Quality: Assessment of prompt CORSIA EEUs for the 2024-2026 compliance period (first phase) as defined by the International Civil Aviation Organization (ICAO).
Quantity: Min 10,000 tCO2e, Max 100,000 tCO2e
Vintage: 2021 to 2026
Registry: Those approved by ICAO for CORSIA phase 1
Location: Global
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time
Notes: The assessment reflects the most competitive and fungible credits that meet the price specification. The International Civil Aviation Organization (ICAO) publishes information on the CORSIA scheme and EEUs at https://www.icao.int/environmental-protection/CORSIA/Pages/default.aspx.

These prices will be a part of the Fastmarkets Carbon package.

To provide feedback on these prices or if you would like to provide price information by becoming a data submitter to these prices, please contact Sam Carew by email at: pricing@fastmarkets.com. Please add the subject heading FAO: Sam Carew, re: CORSIA phase 1.

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.

The post Launch of CORSIA Phase 1 carbon credit price assessment: pricing notice appeared first on Fastmarkets.

• ARR VCS, Latin America, $/tCO2e
• ARR VCS v19 differential, Latin America, $/tCO2e
• ARR VCS v20 differential, Latin America, $/tCO2e
• ARR VCS v21 differential, Latin America, $/tCO2e
• ARR VCS native species differential, Latin America, $/tCO2e
• ARR VCS single species differential, Latin America, $/tCO2e
• ARR GS, Latin America, $/tCO2e

The specifications are as follows:

ARR VCS, Latin America, $/tCO2e (CB-CC-0016)
Quality: Carbon credits from representative multi-species ARR projects in Latin America, verified and issued under Verra’s Verified Carbon Standard (VCS), from vintages of the past five years.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: Past five years
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time.
Notes: The assessment reflects the most competitive and fungible credits that meet the price specification. The assessed vintages will roll at the start of each year. In 2024, the assessment represents vintages 2020-2024; from January 2025, it will represent vintages 2021-2025.

ARR VCS v19 differential, Latin America, $/tCO2e (CB-CC-0017)
Quality: The price differential for vintage 2019 ARR Latin America credits to the ARR VCS, Latin America, $/tCO2e (CB-CC-0016) assessment.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

ARR VCS v20 differential, Latin America, $/tCO2e (CB-CC-0018)
Quality: The price differential for vintage 2020 ARR Latin America credits to the ARR VCS, Latin America, $/tCO2e (CB-CC-0016) assessment.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2020
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

ARR VCS v21 differential, Latin America, $/tCO2e (CB-CC-0019)
Quality: The price differential for vintage 2021 ARR Latin America credits to the ARR VCS, Latin America, $/tCO2e (CB-CC-0016) assessment.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2021
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

ARR VCS native species differential, Latin America, $/tCO2e (CB-CC-0020)
Quality: The price differential for credits issued by Latin America ARR projects that plant 100% native species to the ARR VCS, Latin America, $/tCO2e (CB-CC-0016) assessment.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: Past five years
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time. 
Notes: The assessed vintages will roll at the start of each year. In 2024, the assessment represents vintages 2020-2024; from January 2025, it will represent vintages 2021-2025.

ARR VCS single species differential, Latin America, $/tCO2e (CB-CC-0021)
Quality: The price differential for credits issued by Latin America ARR projects that plant only single species to the ARR VCS, Latin America, $/tCO2e (CB-CC-0016) assessment.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: Past five years
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time
Note: The assessed vintages will roll at the start of each year. In 2024, the assessment represents vintages 2020-2024; from January 2025, it will represent vintages 2021-2025.

ARR GS, Latin America, $/tCO2e (CB-CC-0022)
Quality: Carbon credits from representative multi-species ARR projects in Latin America, verified and issued by Gold Standard, from vintages of the past five years.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: Past five years
Registry: Gold Standard
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time
Notes: The assessment reflects the most competitive and fungible credits that meet the price specification. The assessed vintages will roll at the start of each year. In 2024, the assessment represents vintages 2020-2024; from January 2025, it will represent vintages 2021-2025.

These prices will be a part of the Fastmarkets Carbon package.

To provide feedback on these prices or if you would like to provide price information by becoming a data submitter to these prices, please contact Sam Carew by email at: pricing@fastmarkets.com. Please add the subject heading FAO: Sam Carew, re: ARR prices.

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.

The post Launch of seven ARR voluntary carbon price assessments and differentials: pricing notice appeared first on Fastmarkets.

• REDD+, Latin America, $/tCO2e
• REDD+ v19 differential, Latin America, $/tCO2e
• REDD+ v20 differential, Latin America, $/tCO2e
• REDD+ v21 differential, Latin America, $/tCO2e
• REDD+, Sub-Saharan Africa, $/tCO2e
• REDD+ v19 differential, Sub-Saharan Africa, $/tCO2e
• REDD+ v20 differential, Sub-Saharan Africa, $/tCO2e
• REDD+ v21 differential, Sub-Saharan Africa, $/tCO2e
• REDD+, Southeast Asia, $/tCO2e
• REDD+ v19 differential, Southeast Asia, $/tCO2e
• REDD+ v20 differential, Southeast Asia, $/tCO2e
• REDD+ v21 differential, Southeast Asia, $/tCO2e

The specifications are as follows:

REDD+, Latin America, $/tCO2e (CB-CC-0001)
Quality: Carbon credits from representative REDD+ projects in Latin America, verified and issued under Verra’s Verified Carbon Standard (VCS), from vintages of the past five years. Credits must also have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: Past 5 years
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time
Notes: The assessment reflects the most competitive and fungible credits that meet the price specification. The assessed vintages will roll at the start of each year. In 2024, the assessment represents vintages 2020-2024; from January 2025, it will represent vintages 2021-2025.

REDD+ v19 differential, Latin America, $/tCO2e (CB-CC-0002)
Quality: The price differential for vintage 2019 REDD+ Latin America credits to the REDD+, Latin America, $/ tCO2e (CB-CC-0001) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2019
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+ v20 differential, Latin America, $/tCO2e (CB-CC-0003)
Quality: The price differential for vintage 2020 REDD+ Latin America credits to the REDD+, Latin America, $/ tCO2e (CB-CC-0001) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2020
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+ v21 differential, Latin America, $/tCO2e (CB-CC-0004)
Quality: The price differential for vintage 2021 REDD+ Latin America credits to the REDD+, Latin America, $/ tCO2e (CB-CC-0001) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2021
Registry: Verra (Verified Carbon Standard)
Location: Latin America
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+, Sub-Saharan Africa, $/tCO2e (CB-CC-0005)
Quality: Carbon credits from representative REDD+ projects located in Sub-Saharan Africa, verified and issued under Verra’s Verified Carbon Standard, from vintages of the past five years. Credits must also have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: Past five years
Registry: Verra (Verified Carbon Standard)
Location: Sub-Saharan Africa
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time
Notes: The assessment reflects the most competitive and fungible credits that meet the price specification. The assessed vintages will roll at the start of each year. In 2024, the assessment represents vintages 2020-2024; from January 2025, it will represent vintages 2021-2025.

REDD+ v19 differential, Sub-Saharan Africa, $/tCO2e (CB-CC-0006)
Quality: The price differential for vintage 2019 REDD+ Sub-Saharan Africa credits to the REDD+, Sub-Saharan Africa, $/ tCO2e (CB-CC-0005) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2019
Registry: Verra (Verified Carbon Standard)
Location: Sub-Saharan Africa
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+ v20 differential, Sub-Saharan Africa, $/tCO2e (CB-CC-0007)
Quality: The price differential for vintage 2020 REDD+ Sub-Saharan Africa credits to the REDD+, Sub-Saharan Africa, $/ tCO2e (CB-CC-0005) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2020
Registry: Verra (Verified Carbon Standard)
Location: Sub-Saharan Africa
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+ v21 differential, Sub-Saharan Africa, $/tCO2e (CB-CC-0008)
Quality: The price differential for vintage 2021 REDD+ Sub-Saharan Africa credits to the REDD+, Sub-Saharan Africa, $/ tCO2e (CB-CC-0005) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2021
Registry: Verra (Verified Carbon Standard)
Location: Sub-Saharan Africa
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+, Southeast Asia, $/tCO2e (CB-CC-0009)
Quality: Carbon credits from representative REDD+ projects located in Southeast Asia, verified and issued under Verra’s Verified Carbon Standard (VCS), from vintages of the past five years. Credits must also have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: Past five years
Registry: Verra (Verified Carbon Standard)
Location: Southeast Asia
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time.
Notes: The assessment reflects the most competitive and fungible credits that meet the price specification. The assessed vintages will roll at the start of each year. In 2024, the assessment represents vintages 2020-2024; from January 2025, it will represent vintages 2021-2025.

REDD+ v19 differential, Southeast Asia, $/tCO2e (CB-CC-0010)
Quality: The price differential for vintage 2019 REDD+ Southeast Asia credits to the REDD+, Southeast Asia, $/ tCO2e (CB-CC-0009) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2019
Registry: Verra (Verified Carbon Standard)
Location: Southeast Asia
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+ v20 differential, Southeast Asia, $/tCO2e (CB-CC-0011)
Quality: The price differential for vintage 2020 REDD+ Southeast Asia credits to the REDD+, Southeast Asia, $/ tCO2e (CB-CC-0009) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2020
Registry: Verra (Verified Carbon Standard)
Location: Southeast Asia
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time

REDD+ v21 differential, Southeast Asia, $/tCO2e (CB-CC-0012)
Quality: The price differential for vintage 2021 REDD+ Southeast Asia credits to the REDD+, Southeast Asia, $/ tCO2e (CB-CC-0009) assessment. Credits must be issued under Verra’s Verified Carbon Standard (VCS) and have the Climate, Community and Biodiversity (CCB) certification.
Quantity: Min 5,000 tCO2e, Max 50,000 tCO2e
Vintage: 2021
Registry: Verra (Verified Carbon Standard)
Location: Southeast Asia
Timing: Prompt delivery
Unit: USD per tonne of CO2 equivalent
Publication: Weekly, Wednesday, by 12:30pm London time.

These prices will be a part of the Fastmarkets Carbon package.

To provide feedback on these prices or if you would like to provide price information by becoming a data submitter to these prices, please contact Sam Carew by email at: pricing@fastmarkets.com. Please add the subject heading FAO: Sam Carew, re: REDD+ prices.

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.

The post Launch of 12 REDD+ voluntary carbon price assessments and differentials: pricing notice appeared first on Fastmarkets.

Retirements of voluntary carbon credits rose from around 31 million tCO2e in 2016 to just over 160 million tCO2e in 2021 across the four main registries (Verra, Gold Standard, ACR and CAR). But demand eased slightly to 154 million tCO2e in 2022 before rising to a record 163 million tCO2e in 2023. The market looks to be continuing this trend of recovering demand this year, with 2024 retirements at 137 million tCO2e as of late November and around 10 million tCO2e higher than a year earlier. Corporate demand typically ends the year on a high note, as end users look to balance their end-of-year carbon accounting and meet their sustainability targets, with December seeing the highest monthly retirements each year since at least 2020. Without including the last week of November data, December retirements would need to be around 75% of 2023 levels for overall retirements to again set a record.

The market has looked to address the integrity and quality concerns raised over the past years through a variety of initiatives. Independent governance bodies have emerged, such as the Integrity Council for the Voluntary Carbon Market (IC-VCM) which was created in 2021 and looks to set a definitive global threshold for high-quality carbon credits with its core carbon principles (CCP) tag. The first CCP-approved carbon-crediting methodologies were announced in June this year and included landfill gas and ozone-depleting substances projects. Since then, existing renewable energy methodologies have been rejected, while certain REDD+ methodologies were approved in November. As part of this, we have seen some standards update or release new versions of their methodologies in an attempt to align with the CCPs.

Some companies have also looked to industry schemes such as CORSIA to provide an initial quality cut, while ratings agencies have become more prominent, providing independent ratings to projects in a bid to drive greater transparency and quality.

Supply remains abundant

Despite retirements reaching record levels last year, the market as a whole is oversupplied because issuances remain higher than retirements across all project types year on year. The growth in this oversupply has eased in recent years, with issuances outweighing retirements by 200 million tCO2e in 2021 before falling below 100 million tCO2e in both 2023 and 2024 so far. This lower oversupply growth rate has been caused by an almost 30% drop in credits issued between 2021 and 2023 to 260 million tCO2e from 365 million tCO2e. A sharp drop in credit pricing, particularly for avoidance credits, weighed on the market with some project developers delaying credit issuances.

But despite this, over 960 million tCO2e of issued unretired credits are currently circulating across all vintages. It remains to be seen how the market deals with these currently circulating credits, particularly from either earlier vintage credits or credits from projects perceived as lower quality. Around 180 million tCO2e of these remaining credits are from vintage 2015 or earlier and predate the Paris Agreement (pre-Paris). Meanwhile, close to a third are from renewable energy projects, which as we mentioned earlier recently failed to gain CCP approval.

REDD+ credits make up around a further third of issued, unretired supply, of which we will talk about in more detail in another article.

The vast majority of these currently circulating credits are from projects that reduce or avoid carbon emissions, with only around 3% made up of those that remove carbon from the atmosphere. At the same time, demand for removal credits has been firm with 2024 retirements already above whole-year 2023 levels, leaving that part of the market much tighter.

What project types are being retired most?

The largest bulk of retirements this year has been credits from Agriculture, Forestry or Other Land Use (AFOLU) projects, which totalled over 51 million tCO2e or around 37%. Within this segment REDD+ is the largest project-type, accounting for around 34 million tCO2e, and around 4 million tCO2e higher than the same time last year. REDD+ demand has steadily improved over the past few years as the segment recovered from media reports about overcrediting and project integrity. REDD+ demand peaked at nearly 61 million tCO2e in 2021 before falling over 40% to around 34 million tCO2e in 2022. Demand reached around 47 million tCO2e last year following a particularly strong December that saw over 15 million REDD+ credits retired. Part of that strong recovery last year was driven by large retirements by Shell, including around 12 million tCO2e of REDD+ credits in November and December 2023.

The second largest segment is renewable energy, which accounts for around 29% of total retirements this year, slightly down from last year’s 33% share. The project category as whole has suffered from historical additionality concerns, which eventually saw Verra and Gold Standard change methodologies to only allow new projects located in Least Developed Countries (LDCs). Typically, projects located within these countries have attracted a premium to those in other countries.

Credits from cookstove projects have seen a sharp rise in demand in recent years, with retirements rising from less than 4.5 million tCO2e in 2020 to close to 20 million tCO2e in 2024. Part of this increase can be attributed to the surge in new cookstove projects being registered, with issuances rising from 7.5 million tCO2e to around 45 million tCO2e over the same period. However, it should be noted that around 5 million tCO2e of this year’s “retirements” come in the form of cancellations of overissued credits from C-Quest Capital cookstoves projects in October, slightly inflating demand figures for this year.

What about future demand?

Demand for avoidance credits will continue to provide the majority of voluntary carbon credit demand in the near-term, partly owing to the greater supply of these credits. Price-conscience buyers are likely to be less picky around what credits they source, but overall there is a move toward higher integrity projects. On top of this, avoidance credits, such as REDD+ and cookstoves, can also carry many co-benefits in addition to the reduced carbon emissions, attracting interest from buyers.

Interest in carbon dioxide removal credits has been growing both from nature and tech-based solutions. Given limited circulating supply of these credits, some companies have been securing long-term offtake agreements to ensure their supply of these credits in the years ahead. Earlier this year, BTG Pactual Timberland Investment Group signed agreements with both Meta and Microsoft for the delivery of multi-million tCO2e of nature-based removal credits through to 2038 and 2043 respectively. Interest in tech-based permanent carbon dioxide removals (CDRs) has also been increasing, with a growing number of multi-year forward purchase agreements made. A lot of this demand data is yet to appear in registry figures with many of these projects still in early development, while some of the methodologies for these project types have also yet to be finalized.

CCPs

Only around 27 million tCO2e of credits have currently been CCP-approved, but as more methodologies get approved over the coming months and projects issue credits under approved methodologies this pool will steadily grow. Project developers will likely look toward achieving price premiums for CCP credits, but the pool of currently approved credits has not been wide enough to test if end buyers will look to the standard as a baseline for their demand.

CORSIA

Demand from airlines is expected to pick up in the coming years as they look to meet their CORSIA commitments but there is still some uncertainty around when significant demand could emerge. The scheme is currently in its first phase which runs from 2024 to 2026, but airlines have until  January 31, 2028, to retire CORSIA Eligible Emissions Units (EEUs). Supply of currently qualifying credits is very slim, with just 7.1 million tCO2e of issued credits from one Jurisdictional REDD (J-REDD) project in Guyana (ART 102) meeting requirements. CORSIA EEUs must be from a registry/standard approved by the International Civil Aviation Organisation (ICAO), issued from projects that started their first crediting period from 2016, have a vintage of 2021-2026 and have had a corresponding adjustment applied.

Corresponding adjustments are a mechanism to avoid double counting of the emissions reduction or removal under Article 6 of the Paris Agreement. These are granted by the host country which will remove the emissions unit from their own Nationally Determined Contributions (NDCs).

ICAO approved Verra, Gold Standard and CAR in November, adding to the already approved ACR and Architecture for REDD+ Transactions (ART) registries, opening the way for increased supply of CORSIA EEUs. But the timeframe for qualifying credits from these registries to be tagged CORSIA Phase 1 eligible is likely to be relatively slow because of the need to protect against corresponding adjustment revocation risk.

The post The state of the voluntary carbon market appeared first on Fastmarkets.

What is the voluntary carbon market?

The voluntary carbon market (VCM) allows companies, individuals, governments and others to voluntarily offset their unavoidable emissions through the purchase and retirement of carbon credits from projects that either avoid or remove carbon dioxide or other greenhouse gasses (GHG) from the atmosphere. Each credit represents one tonne of CO2 or equivalent GHG (tCO2e) avoided or removed from the atmosphere, with the vintage of the credit representing the year the avoidance or removal took place.

With more and more companies approaching or setting interim and net-zero emissions goals, there has been growing interest and scrutiny in the VCM in recent years. One of the key components of the market is additionality, which means that credits should not be generated from projects that were mandated by regulation or would have taken place without carbon finance.

Companies can also take part in the VCM through industry schemes, such as the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), in which airline emissions above 85% of a 2019 baseline are offset.

Who are the main actors in the market?

Project developers

Project Developers are the producers of the market, setting up and managing the projects that will issue the carbon credits. These projects will either remove or avoid carbon being emitted into the atmosphere using either nature-based or tech-based solutions and can vary drastically in type, size and scope. Examples of nature-based projects can include Reducing Emissions from Deforestation and forest Degradation (REDD+), regenerative agriculture, Improved Forest Management (IFM) or Afforestation, Reforestation and Revegetation (ARR). Tech-based solutions will use technology to generate emissions reductions or removals and include project types such as cleaner cookstoves, renewable energy or direct air capture.

Once credits have been issued project developers can sell them either directly to end buyers for retirement, or on to traders where they then enter the secondary market. Some buyers will also look to enter long-term offtake or financing agreements to secure credit supply over a multi-year period.

Registries and standards

To issue credits, projects have to be verified and certified against a standard to ensure its emission reductions or removals are taking place. Standards will have different methodologies, depending on the project type, that the projects will have to follow to become verified. These methodologies can also be updated over time, with projects typically having to transition to the newer methodology when they are next verified or the next time credits are issued.

Credits issued by verified projects will then live on a registry, where the total volume of issued credits can be transparently seen. To track credits through their lifecycle, each one is given a unique identifier to avoid double counting of a credit by multiple end users. When a credit is used by an end buyer to offset their emissions it is called a retirement, and is tagged as such on the registry, which then removes the credit from the market so it can no longer be traded.

An example of some of the larger registries and standards include Verra’s Verified Carbon Standard, Gold Standard, American Carbon Registry and Climate Action Reserve, but there are dozens of other standards with some choosing to focus on more niche areas such as tech-based carbon capture.

Corporates/end buyers

End buyers can either be corporations or even individuals who buy carbon credits to voluntarily offset their carbon emissions as part of their net-zero targets. Some buyers will have a preference for certain types of credits, maybe preferring those with added co-benefits or those based in countries where they have high-polluting operations.

Current end buyers come from a wide range of industries and can retire anything from a few thousand tCO2e of credits per year all the way up to multiple million tCO2e. Some of the largest retirers of carbon credits last year included oil and gas, automotive, logistics, airlines and pharmaceutical companies. Tech companies such as Microsoft have also increasingly looked to tie up forward credit purchases as part of their net-zero strategy. Events such as the Rugby World Cup and the Paris Olympics have also sourced carbon credits in recent years.

Traders

Like any other commodity, market traders operate in the VCM, buying and selling carbon credits either to build positions or to source credits for clients.

What can affect the price of a credit?

The VCM can act like any other commodity market, but with a few nuances.

• Supply and demand: In the form of carbon credits issued and retired. Because projects have to go through standards and registries to issue new credit vintages there can sometimes be delays in newer credits entering the market.
• Project type: Whether the project removes carbon or avoids carbon emissions can have an impact on the price of a credit, with removal projects usually at a premium.
• Primary vs secondary: Typically, the primary market, where buyers go direct to project developers, commands a premium to the secondary market. This can be down to either the buyers looking for increased hand-holding through the process or being more willing to pay knowing the money is going direct to the project.
• Co-benefits: Carbon credits can also be tagged and verified with other co-benefits, such as meeting one of the 17 UN Sustainable Development Goals (SDGs) or meeting certain biodiversity standards.
• Standard and methodology used: The standard and methodology used can have an impact on project pricing, with methodologies that are more conservative in their carbon removal or avoidance verifications usually at a premium.
• Vintage: Each carbon credit has a vintage, which is the year that the emissions removal or avoidance took place. Some buyers prefer newer vintage credits and are willing to pay a premium for these, but the vintage curve can also vary from project type to project type.
• Country: Either from buyer preference for certain geographies that they operate in, or potential risks from upcoming regulation.

There is also a growing push towards integrity and quality of projects as the market looks to move forward from recent controversies around overcrediting and the quality of some existing projects out there. This has seen independent governance bodies emerge, such as the Integrity Council for the Voluntary Carbon Market (IC-VCM), which aims to set and maintain a global standard for high integrity in the voluntary carbon market with its Core Carbon Principles (CCPs) which we will go into more detail in another article.

Why is transparent pricing important to the VCM?

The VCM is nascent and often opaque and fragmented. This can leave buyers hesitant to step in and project developers uncertain of their long-term pricing. Even within each project type there can be wild variations in pricing between projects. Clear benchmarks and price signals will allow for greater transparency into what is driving the price of each type of carbon credit, thereby increasing liquidity and helping the market to scale.

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