Price Transparency and Growth in the Voluntary Carbon Market

Carbon offsets are quickly becoming a key strategy for companies and nations to meet their climate change initiatives. The voluntary carbon market (VCM) has seen rapid growth in response to growing demand for emissions-reduction practices. In November 2021, new trades put the value of the VCM at $1 billion, according to Ecosystem Marketplace.

The VCM is on a growth trajectory, with the potential to become a $30 billion industry, according to the Taskforce on Scaling Voluntary Carbon Markets (TCVCM). However, it is not without challenges.

Price transparency is one of the many obstacles that VCM market participants face. Those players are a complex mix of buyers, sellers and financial groups, each with a different influence on supply and demand dynamics.

The groundbreaking OPIS Global Carbon Offsets Report solves this problem by providing daily price assessments for more than 55  voluntary carbon offset credits. Each of these offsets markets have unique price fundamentals that are driven by specific industries and jurisdictions. The recently expanded GCOR includes daily pricing of Voluntary REDD+ Credits, CORSIA Eligible Offsets and California Carbon Offsets, as well three new voluntary carbon credit price assessments: 

  • Carbon Neutral Fuels Index (OPIS CNFI)
  • Core Carbon Credits (OPIS CCP)
  • Climate Community and Biodiversity Standards (OPIS CCB)

Voluntary carbon market participants

Within the VCM, there are the credit creators–the project developers whose work reduces or prevents carbon from entering the atmosphere. For each ton of carbon removed or stored from these projects, a carbon credit is created. This group largely comprises the sellers of credits in the VCM.

The buyers are those who are purchasing these credits to offset their own carbon emissions and work towards meeting their environmental goals. Buyers include corporations, airlines and governments with emissions-reduction goals. Registries, including Verra, American Carbon Registry, Gold Standard and others, issue and validate credits for various project types.

Financial players have entered the market as both buyers and sellers.

Buyers in the VCM generally fall into two groups: those who need so-called higher-quality credits with additional co-benefits, and those who need a basic credit considered to be of a more moderate quality. For example, some companies purchase credits, without co-benefits, to make marine fuels carbon-neutral. Others, however, may require credits like REDD+, which offer social actions like community projects and saving wildlife. According to OPIS, REDD+ credits have traded as high as $17/mt.

The price spread between the two types of credits can be more than $8 per metric ton.

Price transparency will enable VCM growth

With more than 200 types of projects, price transparency is one of the biggest challenges in the VCM today. Each project is unique, from the development phase to implementation and credit issuance. Buyers and sellers alike are facing the problem of price discovery, particularly with the more obscure projects. Both groups suffer in a market without price transparency.

As the market grows and carbon offset projects expand and multiply and credit prices become more fungible, project developers and other sellers will get a better handle on how to price their credits. Through industry discussions and education, players will have a better understanding of the project accreditation process and the true value of offset credits.

OPIS Global Carbon Offsets Report supports price transparency

The OPIS Global Carbon Offsets Report provides critical pricing transparency for net-zero buyers, traders, brokers, researchers and project developers.

The expanded GCOR daily report includes:

  • Emissions offsetting prices for 18 standard liquids and gaseous fuels and the eight International Marine Organization’s (IMO) shipping fuels
  • Physical assessments for Voluntary REDD+, CORSIA Eligible, California Carbon Offset credits and other agriculture, forestry and land use (AFLOU) credits
  • 30-day record of confirmed transactions in the offset credits market
  • Supply and demand trends in the VCM
  • Value associated with the carbon benefits that carry Sustainable Develop Goal (SDG) co-benefits

Benchmark pricing solutions for voluntary carbon markets are now available with the OPIS Global Carbon Offsets Report. Now you can manage carbon neutrality commitments with access to compliance and voluntary offsets markets pricing, real-time news and in-depth analysis.

Tags: Carbon