Despite 2009 being a stressful year for financial markets, voluntary carbon markets survived and in some cases thrived. Although the number and value of trades decreased from 2008 levels, there was a new emphasis on action in the United States. Many voluntary market participants transacted in anticipation of a future domestic compliance system. Although volumes and values were down, market development was evident as purchasers demanded more information about the origins of credits and compliance with third party standards. Interestingly, 2009 saw fewer purchases of voluntary credits in Europe and those purchasing these credits were more likely to retire them upon purchase.
These are findings of the recent report Building Bridges: State of the Voluntary Carbon Markets 2010, by Ecosystem Marketplace & Bloomberg New Energy Finance. This report is complied by various players and observers in the worldwide carbon markets based on voluntary reports of over 200 suppliers. It is designed to give a market-wide perspective on trading volumes, credit prices and project information.
Some trends discussed in this year’s report
- Average volume and price of credits decreased across the voluntary market in 2009
- Suppliers reported a decline in volumes traded by 26% although 2009 market volumes were still 39% above 2007 levels
- Preference of buyers to purchase specific offset credits, “over the counter” (OTC) versus standardized credits on registries (such as Carbon Financial Instruments (CFIs) traded on the Chicago Climate Exchange (CCX)). In fact, CCX credits saw significantly lower prices than OTC trades
- OTC average price declined by 12% from 2008 and CCX credits experienced a 73% drop in prices from 2008 levels
- Evidence of a maturing market, where buyers are focused increasingly on quality, accountability and specific project types
- Increased infrastructure development (protocols, registries, project types, accountability) and use of 3rdparty standards (90% adhered to standard)
- Great uncertainty about future compliance markets in 2009 affecting speculative purchasing
- Trading platforms for OTC credits becoming more popular
- Increased attention and trading of forestry credits, especially REDD (Reducing Emissions from Deforestation and Degradation) although the most popular forestry projects continued to be afforestation/reforestation by a small margin
- Methane destruction projects were the most popular project type, capturing 41% of the OTC market, where as Forestry accounted for 34% and renewable energy for 17%. In 2009 methane and forestry project roughly doubled at the expense of renewable energy
- The Voluntary Carbon Standard is clearly the 3rd party standard of choice, followed closely by the Gold Standard, the Climate Action Reserve and the Clean Development Mechanism
- Respondents were still bullish about the market, expecting significant growth through toe 2012 and beyond
Despite the potential, voluntary markets continue to remain a small fraction of the size of the regulated markets. We expect the carbon market to become increasingly important as more climate regulation is implemented in North America and for the voluntary markets to continue to play a tempered role in the overall carbon markets.
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