Voluntary carbon markets. Trends 2023

Recently, Ecosystem Marketplace (EM) has issued its latest report summarising the key findings The most important facts and figures on the current state of voluntary carbon markets (VCMs). These are key to understanding the evolution of VCMs and how to apply them in the business environment for environmental benefits.

Price per tonne of carbon continues to rise

The average price of carbon credits has reached a new record high in 2022. This increase represented an increase of 82 %, from four to 7.4 dollars per tonne. However, this value in 2023 has fallen slightly below $7.

Overall trade volume has decreased

However, the volume of VCF lending has fallen by 51 % from the peak in 2021. Adding this to the previous figure, we obtain a stabilisation of the market compared to previous years, around 2 billion dollars.

Nature-based solutions, main driver of high market value

SBNs (including forestry, land use and agriculture projects) accounted for almost half of the market share, at 46 %. The price of this credit typology has increased by 76 % between 2021 and 2022. Specifically, forestry and land use projects have increased by 14 %; those based on agriculture have increased by 283 % in price compared to 2021.

Co-benefit certifications are increasingly sought after by credit buyers.

Credits with environmental and social co-benefits certification are increasingly in demand, along with projects working towards the SDGs.

Overall, trends show a decrease in the number of credit buyers, coupled with an increase in the price of carbon credits. This seems to be repeating itself by 2023. However, EM indicates that buyers who do not leave the market are willing to pay more for high quality carbon credits. To do so, they tend to choose the latest credits, as they are based on the latest technology and scientific standards, and they tend to look for credits with co-benefit certifications and linked to the SDGs. 

So why should a company join voluntary carbon markets?

According to a new MS report on carbon credits and corporate climate strategies, companies participating in the GCM are leaders in transparency, ambition and climate action, giving them credibility in their climate claims.

In addition, a good indicator of a company's governance is the extent to which they are managing climate change at the corporate level. A company participating in GCMs indicates that it is already addressing climate change in its direct operations and along its value chain. The purchase of these credits is therefore associated with a decrease in CO_2e year after year.

How to use voluntary carbon markets as a corporate climate strategy?

The most important thing is to incorporate transparency, ambition and climate action criteria. This will lead the company to establish Scope 1 and 2 emission reduction methods. Scope 3 emission reduction, however, is always more complicated.

But in order to reduce, you first have to know. At Zirkel we are experts in calculating the carbon footprint in its three scopes. This estimate allows us to know what impact the different activities have both inside and outside the organisation. And, knowing this, you can begin to define reduction strategies. These strategies should be linked to the objectives of the Paris Agreement, where neutral emissions are expected in the long term. At Zirkel we help to define the most appropriate methodologies to achieve this, such as SBTs. Therefore, complementary to technologies for decarbonisation (or emissions reduction), GCMs play an important role in reducing emissions, with a company being able to reduce quantities equivalent to those produced in Scope 3, which are more difficult to reduce, or in other scopes where it is no longer possible to reduce further.

References:

Report on the state of the VCM:Forest Trends' Ecosystem Marketplace. 2023. State of the Voluntary Carbon Markets 2023. Washington DC: Forest Trends Association

Report on carbon credits and corporate climate strategies: Forest Trends' Ecosystem Marketplace. 2023. "All in on Climate: The Role of Carbon Credits in Corporate Climate Strategies". Washington DC: Forest Trends Association.