August 2023 Voluntary Carbon Offsets Update
News
ICE creates VCM liquidity provider program. Intercontinental Exchange (ICE) is launching a liquidity provider program to stimulate trading in its voluntary carbon credit futures. The program will be active from September 18, 2023, to June 30, 2024, and is accessible to all market participants using ICE's suite of carbon credit products. ICE will offer predetermined incentives to liquidity providers, though specific details were not disclosed. The exchange also noted that it would monitor all activity on its platform and might enforce disciplinary measures for transactions not in compliance with regulations. ICE introduced its tradable voluntary carbon offering a year ago. Still, interest has been limited, with just 145 contracts of open interest across all futures contracts as of the most recent data.
Researchers find methodological failures and over-crediting in REDD+ projects. A recent study by the University of California's Berkeley Carbon Trading Project reveals significant issues in popular forest protection offset methodologies used in REDD+ projects. Some of these methodologies offer too much flexibility to project developers, leading to widespread over-crediting of climate impacts and carbon credits issued. Researchers found that baseline and leakage calculations were exaggerated, with an average overestimation of nearly 1,460% in baseline deforestation. Additionally, carbon accounting was inaccurate, and safeguards meant to protect local communities were often disregarded. The study recommends stricter methodology guidelines and alternative offsetting approaches to address these problems.
Price of direct air capture units could fall 60% by 2030. According to an analysis by voluntary carbon market data firm AlliedOffsets, the price per tonne of direct air capture (DAC) units is projected to drop below $450 by the end of the decade. This estimate is based on data from approximately 100 industry forecasts. The analysis suggests that DAC prices will decrease from nearly $1,200 per tonne today to around $450 per tonne by 2030. Furthermore, it anticipates a significant increase in annual DAC capacity, with over 1.5 million tonnes of CO2 equivalent removed annually by 2030. Other carbon removal technologies, such as ocean capture, enhanced rock weathering, and biochar, are also expected to see price declines and increased capacity.
Issuances down; retirements down more
A total of 19.71 million offsets were issued in the month of August, down from 22.75 million tons in July. Retirements fell by 5.6 million tons from 10.71 million in July to 5.67 million in August. Retirements have continuously trended lower in 2023, while issuances have held relatively steady.
Waste and Landfill, and Alternative Energy held a much higher percentage of total issuances and retirements
Waste and Landfill projects accounted for 4% of issuances and retirements in August, compared with 1% of issuances in July and 3% of retirements. Alternative Energy projects gained a larger share of issuances at 19%, but retirements of those projects fell slightly from 14% to 11%. As is normally seen, energy and Forestry continue to be the majority of both issuances and retirements.
The surplus of unused offsets increased by 14 million tons.
The bank of offsets increased by 14 million tons in August, about 2 million more than last month but below the year-to-date average of 18.10 million tons. According to our calculations, the total bank of available offsets is around 1.04 billion tons.