OPIS Provides Carbon Offsets Price Transparency During VCM Evolution

In a world demanding climate action, the voluntary carbon market (VCM) has become an oasis for an ever-growing roster of corporations eyeing offsets as part of a net-zero emissions strategy.

As buyers continue to stack up, traditional sellers of carbon offsets such as climate project developers are poised to capitalize on fresh interest in the VCM – a space that for decades belonged mostly to legacy conservationist organizations and their eco-minded clients.

The development is exemplified in recent market data.

Globally, issuances for carbon offset credits reached 50.81 million in the first quarter of 2021, up from 10.5 million in the same quarter during 2016, according to Ecosystems Marketplace data.

This year, the VCM is estimated to be valued at $300 million, “but this is fast increasing,” said ClearBlue Markets Managing Director of Markets Nicolas Girod. In 2020, global carbon offset sales totaled about $100 million, he said.

Meanwhile, trading of offsets this year on Xpansiv’s CBL Markets carbon spot contracts has already topped 50 million mtCO2e, up from 31 million mtC02e in all of 2020.

The momentum will continue, and it’s widely believed that the VCM must scale up to five times before 2030 to help meet the influx of corporate emission reductions promises.

But, how can the VCM achieve such massive growth?

That question has attracted the attention of many world leaders, some of whom are working with financial institutions to drive private finance into the voluntary carbon offset market. And it’s not without good reason – the VCM has the potential to become a $30 billion industry, according to the Taskforce on Scaling Voluntary Carbon Markets (TCVCM).

The 430-plus member group has tasked itself with smoothing out the VCM’s traditionally opaque and fractured landscape with a new, technical, market blueprint that would serve as the setting of future offsets trading.

In a Phase II Report Summary published in early July, the taskforce said it hopes “to bring all parts of the value chain to work intensively together on the most pressing pain-points facing voluntary carbon markets.”

While VMC stakeholders – new and old – lay the groundwork to prepare for years to come, price transparency remains a cornerstone to building a robust network of counterparties, sources have told OPIS.

According to Joshua McCarron, vice president of business development at Everland, a climate mitigation company, price “indexing and price transparency are critically important to growing the voluntary carbon market because they increase investor and buyer confidence by enabling them to make more informed decisions. That increased confidence can help encourage and facilitate new participants and investments.”

Everland represents some of the world’s most impactful REDD+ forest conservation projects (REDD+ Reducing Emissions from Deforestation and Forest Degradation) that protect wildlife and enhance the well-being of forest communities, according to the company.

Similarly, ClearBlue Markets’ Girod said that price transparency is key “to get people trading and get more players joining” to create a more robust marketplace. Participants are also seeking clarity to understand the “underlying value” of offset credits based on project type, vintage and co-benefits, he said.

Since its launch in December 2020, the groundbreaking OPIS Global Carbon Offsets Report has served as a key benchmark for the VCM, delivering a first look at pricing and transparency for two key categories of credits – Voluntary REDD+ Credits and the OPIS CEO for credits that fall under the standards of the International Civil Aviation Organization’s emissions reduction program, known as CORSIA.

OPIS daily Voluntary REDD+ Credits prices reflect carbon credits certified by Verra (VCS) that include validation under the Climate, Community & Biodiversity Standards (CCB). The assessments reflect confirmed bids, offers and trades reported by approved traders, brokers and electronic platforms.

One well-established REDD+ offsets producer, Brazilian forest conservation company Biofílica, has used the OPIS daily Voluntary REDD+ Credits assessment index to gain a higher price value for its carbon offsets in the global market.

“Biofílica has been selling REDD+ carbon offsets domestically in Brazil and internationally for years, and even with good marketing material and videos presenting impactful socioenvironmental co-benefits, our offsets were still underestimated,” Biofílica’s Commercial Manager for Carbon Credits Laion Pazian said.

The OPIS Global Carbon Offsets Report was the “first initiative to present a daily price index with an excellent methodology,” he said.

Biofílica now provides the report along with its commercial proposals to buyers, and “so far, we’ve been able to provide transparency and evidence to support our offers and it has worked. It helped us to convert clients and their procurement departments to support higher value forest carbon projects,” Pazian said.

Stronger demand for carbon credits this year from corporations seeking to reduce their carbon footprint and energy stakeholders implementing carbon neutral strategies in product deliveries has resulted in an increase offset pricing.

Average pricing for OPIS Voluntary REDD+ Credits for vintages 2013-2021 began this year at a range of $5-$6.58/mt, and those vintages are currently pricing about 20% stronger around $6-$8.18/mt. Meanwhile, OPIS CEO prices increased more than three-fold during that timeframe to $2.90/mt from 80cts/mt.

Tags: Carbon