Earlier this year, Forest Trends, a non-profit dedicated to research and promotion of good practices in environmental finance, released a quarterly report on the voluntary carbon market. This report explores recent data about the voluntary market of carbon offsets and discusses trends and events to watch in the next year.
By Claudie Eustache
Earlier this year, Forest Trends, a non-profit dedicated to research and promotion of good practices in environmental finance, released a quarterly report on the voluntary carbon market. This report explores recent data about the voluntary market of carbon offsets and discusses trends and events to watch in the next year.
A positive trend noted in this report is the consistent increase in voluntary offsets issuance and retirement, which, globally, means more GHG reductions from initiatives that aren’t necessarily imposed by legislation. 2017 was a record-high year, with 62.7 million offsets issued and 42.8 million offsets retired. These issued offsets for 2017 represent the equivalent of not consuming around 150 million barrels of oil. Moreover, we have to take into account that issued offsets numbers are always smaller than the actual number of reductions, since not all reductions of a project will go through the process of validation, verification and offset issuance.
The report also analyzes offsets production and trade, distributed by voluntary certification standard. Sustainable Community’s certification program, Verified Carbon Standard (VCS), recently rebranded as VERRA, remains the most popular program for project certification, with about 65% of offsets coming from VCS-certified projects. It is also the most largely traded in both volume and value.
On the matter of pricing, it is interesting to note that, even with an average price between USD$3-$6/tCO2e, prices continue to vary strongly. EM recorded prices from USD$ 0.1 to USD$ 70. Large multi-national private companies continue to be the biggest end-buyers. Moreover, a survey of various market participants underlined the fact that for many buyers, a low price was not necessarily the only purchase criteria, the presence of co-benefits such a local economic development and biodiversity protection being often factored in.
Lastly, on voluntary market issues to follow in the next year, the question of interaction between the voluntary and domestic compliance markets will be an important one. There is a wide range of format in domestic compliance markets, and some of them have already included or are refining their instruments to include voluntary offsets in their scheme. The issues of a Paris Agreement-related international compliance market for countries and the current development of an international market specific to civil aviation (CORSIA) are also to watch.