At the recent Carbon Markets Summit, research firm Sylvera and Pachama brought together thought leaders from around the world to discuss the current complexities and future potential of the carbon market. In collaboration, Sylvera and Pachama have produced a comprehensive guide that outlines the ten most significant trends that these experts predict will shape the carbon market landscape in 2023 and beyond.
One of the key areas where these trends are taking place is in the carbon credit market. Accurate ratings and analytics are crucial for effective decision-making in this market. The report, which can be downloaded here, highlights five key points that summarize the current state and future trajectory of this critical sector.
The voluntary carbon market is experiencing significant changes due to new climate disclosure regulations, guidance from market bodies, and increased media attention. These changes have caused some confusion and hesitation among potential buyers. However, the need for carbon project funding is more crucial than ever.
Corporate buyers are participating in a “flight to quality.” They are becoming involved in projects at an earlier stage and focusing on contribution rather than simply offsetting emissions. This trend is expected to continue in 2023 and beyond.
Technology is playing a crucial role in unlocking greater supplies of high-quality projects. Companies like Sylvera and Pachama are utilizing data and artificial intelligence to help companies confidently invest in high-quality carbon credits.
The mitigation hierarchy encourages companies to prioritize emission reductions over carbon credits. However, this does not mean that carbon credits should be disregarded. Companies can purchase carbon credits throughout their decarbonization journeys as long as these purchases do not replace actual emissions reductions across the value chain.
Despite challenges with legacy credits, limited high-quality supply, and ongoing work on official guidance, there is strong corporate demand for carbon credits. The voluntary carbon market continues to grow, and voluntary credit retirements are on track to beat records in 2023.
These insights provide a clear picture of the current dynamics and future potential of the carbon market. The report emphasizes the crucial role of carbon credits in driving corporate strategies towards decarbonization. It also advocates for investing in high-quality projects, which can deliver both environmental and economic benefits. Furthermore, it highlights the ongoing growth and evolution of the voluntary carbon market.
During the summit, numerous insights on carbon market trends were shared. Here are three meaningful insights that stand out:
1. “Companies leading on climate are demonstrating the difference between hierarchy and chronology: ‘last’ does not have to mean ‘later’.” While carbon credits are often seen as the final step in a company’s decarbonization journey, they can be utilized throughout the process. However, it is crucial that these purchases are not used as a substitute for actual emissions reductions. The report also highlights the urgent need for funding conservation and reforestation efforts, particularly in critical carbon sinks such as the Amazon Rainforest.
2. “Organizations that invest in carbon credits are cutting emissions at twice the rate of their non-credit-buying peers.”
3. “We’re seeing more and more people move upstream to secure these future optics of quality credits that they can’t find on the spot market today. So really, quality is front of mind, even in the upstream space.” This trend reflects corporate buyers’ shift towards investing in early-stage carbon projects to secure future supplies of high-quality credits. This approach demonstrates commitment to the market and allows for some control over the project’s development.
These insights highlight the importance of proactive and strategic investment in the carbon market. By investing in high-quality carbon credits and supporting early-stage projects, companies can make a significant impact on emissions reduction and contribute to a more sustainable future.