Report: Voluntary Carbon Contracted Market to 2023, Driven by Declining Partnerships for REDD+ and Renewable Energy – Ecosystem Marketplace

30 October 2024: New research published today shows the voluntary carbon market (VCM) contracting for the second year in a row. However, the report’s findings also show a growing trend within VCM, with some market segments showing growth while others are declining.

A market analysis from Ecosystem Marketplace finds that total market sales are down 56 percent from 2022-2023. Although the market saw a slower decline last year than in 2021 and 2022, not all phases of projects followed that trend – highlighting the complexity of the market which has grown so much since the voluntary nature of the situation of heaven is spreading in the private sector.

Key points from the report:

• By 2023, the volume and value of the voluntary carbon market contracted for the second year in a row from its peak in 2021, with a 56 percent year-on-year decrease in the number of transactions reported. The total value of VCM’s sales was $723M USD. Disclosures from market participants indicate that negative press coverage and a pause in buying while consumers await guidance from the integrity exercise were the main reasons for the return of consumer investment. .
• Within the Forestry and Land Use category, REDD+ payments, the most popular type of project, lost 62 percent of their value year on year, with the average cost of loans falling by 23 percent. In 2023 there was a rash of negative media coverage of REDD+ that may have contributed to the decline; Many credit buyers may hold off on purchasing while they wait for an update on a widely used project. The drawdown has particularly affected project developers in Asia, Latin America and the Caribbean, where most of these projects are located.
• The loan volume of the Renewable Energy Loan has also decreased compared to 2022, although it is lower than the market as a whole. That decline appears to be a natural consequence of the decline in supply of these debts. The report finds that credit buyers are also moving away from projects with low returns, such as international clean infrastructure financing.
• The scope of partnerships within the Energy, Agriculture, and Household/Community carbon project categories has increased. in 2023.
• The market share for projects that provide mutual benefits for nature and society is growingwith 28 percent of transactions by 2023 funded from projects with proven “beyond carbon” benefits to the environment and society, such as preserving and restoring biodiversity, contributing to the protection of water, or to support a sustainable local economy.
• On average, consumers paid $6.53 per ton of CO2e for carbon credits in 2023, a slight decrease from 2022. Average loan prices in 2023 were higher than any year before 2022. From the beginning of 2024, prices seem to rise again from this discount.
• The publication of ICVCM’s Core Carbon Principles and the launch of VCMI’s Claims Code have contributed to consumer confidence in market value and integrity. But delays in the implementation of these initiatives and the lack of guidance from the Science-Based Targets Initiative (SBTi) on carbon use to achieve net-zero business goals were cited by many respondents as a factor. the original that keeps customers at bay. especially towards the end of 2023.

Alex Procton, report author and Director of Data Solutions and Insights at Ecosystem Marketplacesays, “The voluntary carbon market is undergoing a transformation that focuses on project contribution, integrity, and environmental and social co-benefits. As a result, we are seeing a changing supply of credits from different types of projects and the places where it originates. It is important to pay attention to the green shoots today to understand what types of carbon market projects will be most important for tomorrow’s climate action.”

Michael Jenkins, President and CEO of Forest Trendssays, “Unfortunately it has been a difficult year for many carbon planners, especially those focused on avoiding deforestation – mostly located in the Global South,. The voluntary carbon market is it is still the best tool we have to transfer private funds to communities around the world to demand more resources to better protect nature. Science clearly tells us that we will fall short of our climate goals if we fail to take steps to solve natural climate problems.”

Mark Mondik, Vice President of Carbon Markets at 3Degreessays, “As the market is looking at new conditions, new types of projects and new regulations, we are seeing a shift in demand to find higher discounts with strong environmental claims.”

Dee Lawrence, Founder and Director at High Tide Foundation, says, “It’s disheartening to see that in 2023, the hottest year on record, we saw the voluntary carbon market drop by 56 percent, with revenues of about $1.1 trillion. for the reduction of weather conditions becomes evaporation, compared to the previous year. To be clear, our global climate goals have just fallen short of our reach.”

Will Turner, Ph.D., Senior Vice President, Natural Climate Solutions at Conservation Internationalhe says, “It is encouraging to see that credits from Forestry and Land Use projects are still popular and generally have the highest number of pensioners. This is an indication that the basic need driven by consumers who appreciate nature’s role as an important climate solution. responsibilities. Science-based use of credit within company-wide strategies will continue to be a powerful tool to address the climate problem at the required pace.”

Maximiliano Bernal Temores, Assistant for Carbon Markets, Impact Finance and Markets at The Nature Conservancy.says, “If VCM hopes to increase its mitigation capacity and the value it provides to the environment and communities, especially those that run NCS projects, it is important that the supply of credit reflects its reliability by switching to the best technologies available. SOVCM’s Ecosystem Marketplace report and advanced market engagements like the Symbiosis Coalition show customers are looking for high reliability such as joint benefits, airtightness, and durability. Credit ratings and project developers must incorporate best practices such as strong foundations and recognizing u far to ensure that VCM, especially natural loans, meet the expectations of customers.

The full report, State of the Voluntary Carbon Market 2024: On the Road to Growth, can be downloaded here.

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Ecosystem Marketplace is an initiative of the non-profit organization Forest Trends, and is the world’s leading source of information on ecosystem finance, markets and payments for ecosystem services. As a web-based service, the Ecosystem Marketplace publishes newsletters, current affairs, original articles, and annual reports on market-based approaches to valuing and supporting ecosystem services. EM believes that transparency is a hallmark of strong markets and that by providing accessible and reliable information on pricing, regulation, technology and other market-related issues, it can contribute to market growth, stimulate new thinking, and encourage the development of new markets. and the policies and infrastructure needed to support them. The Ecosystem Marketplace is funded by a variety of organizations, including multilateral and bilateral government agencies, private foundations, and corporations involved in banking, investment, and ecosystem services.