“The State of the Voluntary Carbon Markets 2023” report, recently published by Ecosystem Marketplace (EM), reveals a significant shift in the Voluntary Carbon Markets (VCM). The report highlights a concentration of demand towards high-integrity and high-quality voluntary carbon credits that offer co-benefits beyond mitigating greenhouse gas emissions. Despite their higher price, these credits are in high demand, particularly nature-based credits that hold certifications for co-benefits and align with the Sustainable Development Goals (SDGs). Here are the key findings from EM’s research:
Firstly, the report shows that the average prices of voluntary carbon credits have reached their highest point in 15 years, while the overall trade volumes have declined from the peak seen in 2021. The volume of voluntary carbon credits traded fell by 51%, but the average price per credit surged significantly by 82%. This increase, from $4.04 per ton in 2021 to $7.37 in 2022, has not been seen since 2008. Despite the drop in trade volume and value, this price increase allowed the VCM to remain relatively stable in 2022. In fact, average prices to date in 2023 are still higher than they have been in 15 years.
Nature-based solutions (NBS) were a primary contributor to the high market value, constituting nearly half of the market share at 46%. The prices of NBS credits more than doubled in 2021 and 2022, and preliminary data for 2023 also shows a premium for these credits. The average price of credits from nature-based projects, including forestry, land-use, and agriculture projects, witnessed an increase of 75% and 14%, respectively, from 2021 to 2022. REDD+ projects dominate the NBS credits, but other projects in the Agriculture and Forestry and Land Use categories are also included.
Credits associated with robust environmental and social co-benefits commanded a significant price premium. Projects with at least one co-benefit certification had a 78% price premium compared to those without such certification. Projects aligned with the UN SDGs also demonstrated a considerable price premium, 86% higher than projects not linked to SDGs. This indicates a strong buyer preference for credits that contribute more to societal and environmental well-being.
Newer carbon credits are commanding a higher price, suggesting that voluntary buyers prefer recent vintages with more robust methodologies. In 2022, there was a 57% premium for credits with a more recent vintage compared to a 38% recency premium observed in 2021. This preference for newer credits reflects recent emissions reduction activities and aligning credits with current emissions years.
Credits eligible under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) experienced a significant surge in market value, marked by a 126% increase in price. This growth indicates an expanding relationship between compliance markets and the VCM, as CORSIA’s quality criteria have been adopted by the Voluntary Carbon Markets Integrity Initiative (VCMI). This is crucial as countries begin to implement the Paris Agreement’s Article 6, emphasizing the relevance of CORSIA in broader carbon markets.
The report by Ecosystem Marketplace analyzes self-reported transaction data from over 160 participants in their annual market survey. These contributors represent credits sourced from 1,530 projects across over 130 project types traded globally. The data, which includes project registrations, credit issuances, and retirements, provides a comprehensive analysis of the VCM. Stephen Donofrio, Managing Director of Ecosystem Marketplace, highlighted the shift towards integrity and quality in the market, noting the evolving sophistication of credit buyers and their desire to understand the impact of their investments.
The full report by Ecosystem Marketplace can be downloaded here.