A great article by The Economic Times about all recent global developments related to the voluntary carbon credit markets (VCM). And perspectives about what may be ahead.
VCM grew to $2 billion in 2021, with specialists expecting it to reach between $10 billion and $40 billion by 2030.
In one hand, this reflects the potential for businesses and people to support environmental projects financially. But on the other, in a post-pandemic scenario, prices have been under stress due to global inflationary pressure, declining economic indicators and also due to public and media scrutiny.
As a reference, here are AirCarbon’s Token reference prices (rounded USD/ton CO2e):
Corsia Elegible Token: down from $8 to 1
Agriculture, forestry and land use: $1
Renewables, energy and efficiency: $1 - 2
Household Offset Token (cookstoves): from $10 to 4
Nature-based projects (recent vintages): $6 - 15
BECCS, biochar and DACC projects (long-lived removals): $ 85 - 96
AirCarbon Exchange was launched in Singapore in 2019 focusing first on CORSIA (Carbon Offset Reduction Scheme for International Aviation), further expanding to other types, partnering with UNFCCC, Abu Dhabi Global Market and Deutsche Börse AG.
As such, carbon credits are currently traded as commodities. And because of that “the market has an inherent flaw … instead of building trust and helping scale emission offset and removal projects, this approach is having the opposite effect and enabling poor quality credits to tarnish the market.” Besides, “treated as commodities, all carbon credits are also equal and fungible … quality of carbon offsets varies immensely …”. Not only because of project type, as you noted above.
The article goes on indicating some risks:
Accounting: Can the project accurately enough calculate how much CO2e has been avoided or removed from the atmosphere?
Additionally: Would the emissions be avoided or removed without the purchase of the credit?
Permanence: How long will the emissions be stored, and how certain is that capture?
Sustainable development: How does the project impact local communities and biodiversity?
Because of all that, and the fact that the market is unregulated and mostly still voluntary, you probably recall the Core Carbon Principles recently launched by The Integrity Council for the Voluntary Carbon Market.
There is also a growing number of carbon credits rating agencies, using real-time satellite imaginery, and some activists even calling for the creation of a standardised global rating system for carbon credits.
Towards trustworthiness of the entire carbon market and complete correlation: project type, price and quality.
The article concludes: “It’s time for the market to become more transparent.” Click at the image to read.
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