Soaring demand for carbon offsets is boosting prices and squeezing supply. Offset retailers, including Tribeca Investment Partners Asia, as well as non-profit, MyClimate, have reported that buyers are unable to purchase desired volumes and that recent vintages were mostly sold out.
Interest in the voluntary carbon market has grown in congruence with rising corporate net zero emissions pledges following last year’s COP26 summit. Further attention has also been sparked by the expectation that the voluntary carbon market could grow into a multi-billion dollar market. Between June 2021 and January 2022, the price of ‘nature based’ offsets, such as those from tree-planting schemes, increased more than threefold from around US$4.65/T of carbon to around US$14.40/T (this is according to S&P Global Platts). London-based Natural Capital Partners has commented that polluting companies which previously bought on the instant ‘spot’ market were now looking for long-term contracts, while institutional investors consider the units as a new way to make money. Iosco, the convening body for the world’s securities regulators, believes the burgeoning investor interest strengthens the case for global standards. “If we start to see complex secondary markets and other investment structures emerging, the case for globally consistent good practices or standards will be critical to investor confidence”.
Adapted from an article in Financial Times