Rigorous, structured cross-border carbon trading to aid finance to achieve carbon cuts at lower costs
LONDON (November 15, 2021) - Voluntary carbon markets (VCMs) have the potential to play a pivotal role in closing the gap between what governments can deliver, and what the world needs to achieve to deliver on the Paris Agreement, according to the latest analysis by S&P Global Platts.
The value of VCM market is now more than $1 billion and forecast to increase fifteen-fold by 2030, according the Taskforce on Scaling the Voluntary Carbon Markets.
Paula VanLaningham, head of carbon pricing, S&P Global Platts, said: "Sunday's adoption of Article 6 has opened the door for billions of dollars of investment to flood into the Voluntary Carbon Markets over the next several years. Crucially, Sunday's agreement around Article 6 creates a system that will avoid the potential double-counting of offset emissions between countries, which will help to lend much-needed credibility to the emissions markets in the coming years."
"The decision to limit the number of older Clean Development Mechanism Credits that can be claimed in national targets will lend further credibility to these markets and will, critically, increase the overall price of carbon offsetting, thereby encouraging additional emissions reductions," she noted.
Further, VanLaningham explained, "the new scheme also empowers those countries – many in the Global South – who produce the bulk of the credits on the carbon market, to make their own decisions about which credits they offer for sale on the international market. It also provides them with the opportunity to meet their own national targets with the credits generated by projects within their own borders."
"While there is a lot of work to be done to ensure that the Voluntary Carbon Markets are able to play the role they need to play to meet the objectives of the Paris Climate Agreement, the adoption of Article 6 – long one of the most contentious, unsolved complications of the Treaty – ensures that there is a confirmed role for the market moving forward. This unlocks the potential for a heavy, and much needed increase in green financing for climate projects that can make a real difference in the fight against global heating."
"Rigorously structured and accountable carbon trading across borders will help drive new flows of finance that can achieve real, incremental reductions at lower cost," VanLaningham said.
"Markets can drive cost-effective decisions that recognize differences in abatement potential across geographies and allow for accomplishing more with less of burden."
PRICE TRANSPARENCY
The transparency provided the S&P Global Platts suite of VCM assessments increasingly is relied upon by market participants. S&P Global Platts launched the market's first daily voluntary carbon credit assessments with the publication of Platts CEC, representing CORSIA-eligible carbon credits in January 2021. These new prices have surged by 944% in 2021, with the value pegged at $8.35 per metric ton (/mt) at the close on Nov. 12. Throughout this year, Platts has expanded its suite of VCM assessments to include Platts CNC, which reflects nature-based carbon credits as well as a variety of project types including removal, avoidance, renewable and methane collection credits.
Media Contacts
Global/EMEA: Paul Sandell, + 44 (0)7816 180039, paul.sandell@spglobal.com
Americas: Kathleen Tanzy, +1 917-331-4607, kathleen.tanzy@spglobal.com
Asia: Melissa Tan, +65-6597-6241, melissa.tan@spglobal.com
About S&P Global Commodity Insights
At S&P Global Commodity Insights, our complete view of global energy and commodities markets enables our customers to make decisions with conviction and create long-term, sustainable value.
We’re a trusted connector that brings together thought leaders, market participants, governments, and regulators and we create solutions that lead to progress. Vital to navigating commodity markets, our coverage includes oil and gas, power, chemicals, metals, agriculture, shipping and energy transition. Platts® products and services, including the most significant benchmark price assessments in the physical commodity markets, are offered through S&P Global Commodity Insights. S&P Global Commodity Insights maintains clear structural and operational separation between its price assessment activities and the other activities carried out by S&P Global Commodity Insights and the other business divisions of S&P Global.
S&P Global Commodity Insights is a division of S&P Global (NYSE: SPGI). S&P Global is the world’s foremost provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help many of the world’s leading organizations navigate the economic landscape so they can plan for tomorrow, today. For more information visit https://www.spglobal.com/commodityinsights