S&P Carbon Markets Daily

Carbon Markets Daily

November 29 , 2023

“ COP28 represents a turning point for the progress on the climate agenda and the future of the Paris Agreement . It comes at a critical moment for accelerating collective progress ,” they said in a recent note .

“ Present commitments put the 1.5 C Paris Agreement goal out of reach . The conclusion of the first ever Global Stocktake at COP28 will be a defining moment to assess current gaps and accelerate efforts in climate ambition and implementation ,” said Sara Giordano , principal research analyst at S & P Global .

In a recent interview , COP28 Director-General Majid al- Suwaidi told S & P Global that fast-tracking the pace of the energy transition is a key objective at the global climate summit .

— Eklavya Gupte , Claudia Carpenter

Demand for carbon offsets likely to grow as integrity builds : Bracewell

• Corporates , banks , consumers driving growth

• Article 6 mechanisms can aid VCM volumes

• Standardization to help support credit values

The increase in corporate net zero commitments is driving participation in voluntary carbon markets and promises significant mid-term growth despite today ’ s integrity challenges , Nicholas Neuberger , Senior Counsel , Bracewell LLP , said in a media briefing Nov . 29 .

The VCM is worth over $ 2 billion / year today and is projected to grow to as much as $ 40 billion by 2030 , Neuberger said . This compared to an EU ETS compliance carbon market value of $ 750 billion in 2022 .

“ We ’ re seeing more and more growth in both the buyer and supplier base , with participation doubling in the last few years — most of the world ’ s largest 2,000 companies now have net zero targets ,” Neuberger said .

Investment banks were also making sizable VCM purchases , for their own net zero commitments and for trading purposes .

Many of these transactions were on a futures basis e . g . for 2025 or 2026 , with any interim “ bump ” in the credit price potentially supplying a decent return in the secondary market , Neuberger said .

At retail level , meanwhile , carbon offsets were increasingly being embedded in online purchasing options for individual consumers seeking sustainability .

While demand had recently been impacted by some negative media reports on certain projects , 2023 had also seen a number of integrity initiatives , the lawyer said .

“ Much has been done this year by the industry ’ s quasiregulatory bodies , including the Integrity Council for the VCM on the demand side and the VCM Integrity Initiative on the supply side , while [ dominant VCM registry ] Verra has announced a new methodology for its conservation activities ,” he said .

The trend in improving standards was “ key to unlocking significant new capital ” in the market , which would also benefit from clarifications on Article 6 in the UN ’ s climate conference in Dubai , starting Nov . 30 .

“ We hope COP28 will provide guidance on what projects qualify for participation on international trading mechanisms under Article 6 of the Paris Agreement , which will create a new emissions trading market that could well increase demand for voluntary carbon credits ,” Neuberger said .

In a survey at S & P Global Commodity Insights ’ recent carbon conference in Paris , 44 % of respondents said the VCM would be the primary market for most project developers to sell verified carbon credits to . Some 33 % said compliance markets would be the primary market while 23 % said markets related to Article 6 would be the primary market .

Neuberger said the emergence of carbon credit rating agencies would add a further layer of stress testing and solidity to the VCM , while market consolidation would likely result from a general clarification in standards .

“ A more uniform , standardized market will be a key driver for growth in the VCM , and should result in a move to less variable , and a higher baseline for , credit prices ,” he said .

Platts , part of S & P Global , assessed the price of Carbon Offsetting and Reduction Scheme for International Aviation ( Corsia ) credits at $ 0.69 / mtCO2e Nov . 28 , down 78 % year on year .

By contrast , Platts Tech Carbon Capture credit price has been more stable this year , assessed at $ 119 / mtCO2e Nov . 28 , down 12 % year on year .

— Henry Edwardes-Evans

CARBON AUCTION : UK sells 3.137 million CO2 allowances at GBP41.12 / mtCO2e

Seller : UK Cleared price : GBP41.12 / mt CO2 equivalent ($ 52.20 / mt ) Revenue : GBP128.993 million Volume : 3.137 million mtCO2e Total bids received : 3.8425 million mtCO2e Cover ratio ( 12-month average ): NA Total bidders ( successful ): 18 ( 17 ) Platform : ICE Futures Europe exchange , London Notes : Auctions offer UK Allowances for spot delivery under the UK Emissions Trading System . The cleared price at the previous auction on Nov . 15 was GBP41.52 / mtCO2e .

— Eklavya Gupte