January 2024 has seen a notable increase in retirements compared to the same month last year, and it is projected to surpass retirements in 2022, according to a report by Viridios AI, a voluntary carbon credit market pricing and data provider. Viridios is a climate tech platform that offers carbon credit prices, valuations, and project data to enhance transparency in the voluntary carbon market.
Overall, trading in the Voluntary Carbon Market (VCM) has been relatively light in the past week. Renewable energy credits (RECs), particularly from India, have experienced price increases, leading to a shift in demand from Chinese to Indian credits. In the native species removals market, activity is slow, but a premium is emerging for projects in this category. However, the REDD+ segment, which focuses on nature-based solutions, is experiencing minimal activity, both in the market and over-the-counter, indicating subdued interest in this category. Some sources suggest that political risks may not immediately impact pricing due to low credit supply. On the other hand, others report current impacts on the Corresponding Adjustment market, with fluctuating premiums for cookstove credits. For example, the Rwandan Cookstove project saw a significant jump in price from $5.85 to $14 for vintage 2021.
Cambodia has released its Article 6 operations manual for a water purifier project and an improved cookstoves project, although it has not yet been published.
The projects analyzed by Viridios fall into three major categories: Pre-registration (Development, Review), Registered (Registered, Operational, Verified, Completed, Renewal, Paused), and Issuing. India has the highest number of new projects in the pipeline, while household devices have the most count. REDD/REDD+ projects, which aim to avoid deforestation and degradation, are mainly concentrated in Brazil and have the highest price at $16.17. On the other hand, ARR projects, which include Afforestation, Reforestation, and Revegetation initiatives, are most dominant in China and have the highest price at $24.66. Technology projects (TECH) related to renewable energy, such as Biomass, Biofuels, Hydro, Solar, Wind, and Geothermal, have the largest number of projects (>7,500), but their highest price at $7.11 is significantly lower than nature-based projects.
The report also provides insights on credit issuances and retirements in metric tonnes per month. The highest issuances occur in December for both 2022 and 2023, and the same trend can be observed in terms of credit retirements, with December having the highest number of retirements for both years, exceeding 150 metric tonnes. Verra has the largest share of issuances by recognized standards, followed by Gold Standard (GS). The same is true for the number of credits retired by standard.
In terms of market activity, the majority of the credit volume based on quotations ranges from 0-50,000 credits. This trend has been consistent from November 2023 to January 2024. When comparing the market volume per category, Technology has the largest share compared to Nature-Based projects. This could be attributed to the increased scrutiny over nature-based carbon credit offsets following high-profile investigations last year. However, carbon removal technologies, such as direct air capture, have received significant interest from investors and government support globally.
The report also analyzes VCM activity by major registries, including Verra’s VCS, GS, ACR, CAR, and CDM. VCS and ACR have almost the same footing when it comes to carbon credit volume. Finally, the report presents a geographical analysis of volume by continental regions. The North American region has the largest market volume per week, followed by Asia. In the recent week, the Asian region had the highest volume, with Africa coming in second.
In summary, the opening month of 2024 has revealed a dynamic carbon credit landscape, characterized by a significant increase in retirements and a notable shift towards Indian RECs. The analysis provided by Viridios AI offers valuable insights into various project categories, painting a vivid picture of the evolving trends shaping the voluntary carbon market.