Corporates push voluntary carbon market to highest level since 2008

Transactions of voluntary carbon credits grew to $576m last year, defying the sluggish economy by reaching the highest level since 2008, with corporate buyers making up the vast majority of purchases.

Companies comprised over 92 per cent of voluntary emissions reductions (VERS), which allow businesses to invest in climate-related projects to offset the carbon impact of their organisation, according to new research by Ecosystem Marketplace, an initiative of the non-profit organisation Forest Trends, and analysts Bloomberg New Energy Finance.

Prices bucked the downward trend seen in the EU emissions trading scheme, where credits have lost 60 per cent in their value in a year, by rising slightly from €6 to €6.2 over 2011. Optimism around the start of a California compliance programme, the existence of budding regional programmes and, particularly, continued corporate interest in offsetting emissions and greening supply chains led suppliers to forecast a 70 per cent growth rate for 2012, predicting 227 MtCO2e will be transacted this year.

"Demand has remained strong despite challenging economic conditions [and] corporate buyers ... continue to enjoy real value from carbon offsetting and carbon neutrality," said Jamal Gore, managing director of Carbon Clear, a UK-based offset company that sponsored the research.

"The report highlights the continuing maturity of the voluntary carbon market, against a backdrop of a struggling compliance carbon market. The breadth and quality of the carbon offset credits available to the voluntary market is better than ever before, in part thanks to the continued evolution of voluntary carbon standards and innovative methodologies."

European buyers of voluntary carbon offsets purchased a record 33 million tonnes of carbon credits in 2011, worth $204m. Renewable energy projects proved popular, generating 45 per cent of all transacted reductions in 2011, with wind making up 30 per cent of the entire voluntary carbon market.

However, projects reducing emissions from deforestation and forest degradation (REDD) contributed most to overall market value, making up nine per cent of total market share.

In related news, Thomson Reuters Point Carbon today predicted the first REDD credits eligible for mandatory cap-and-trade schemes, such as EU ETS, could be available from the Brazilian State of Acre by as early as next year.

Point Carbon estimates offsets worth as much as 48 Mt between 2012 and 2020 could initially be used for compliance within the Western Climate Initiative (WCI), comprising California and four Canadian provinces, and the newly formed Korean carbon trading scheme as early as 2015.

"Implementing REDD has faced many challenges in the past, specifically with regard to the prevention of carbon leakage, ensuring project permanence, and additionality," said Emil Dimantchev, an analyst at Point Carbon.

"Although the idea of generating fungible credits from avoided deforestation initiatives got off to a slow start, today there is a real possibility that REDD credits could be used for future compliance in California and beyond. If Acre is successful in generating compliance-grade REDD credits it will pave the way for a new compliance instruments and mark the beginning of new segment of the global carbon market."

In a separate report, Point Carbon predicted the price of credits in the first three years of Australia's cap and trade scheme will start at A$15 (€12.03) in 2015 rising to A$17.05 (€13.68) by 2017. Prior to the trading scheme, the government plans to introduce a carbon tax of A$23 a tonne for 500 companies from next July (€18).