In this report

Voluntary: Zimbabwe throttles carbon credit revenue plans, as bank sees huge growth potential in nature-based solutions

Zimbabwe has reportedly rolled back on its plans to take half of all carbon credit sale proceeds and ringfence a further 20% for local communities in the wake of concerns from investors, while neighboring Mozambique intends to set out its own carbon trade framework next year.

The future of the Kyoto-era Clean Development Mechanism (CDM) is to be discussed by governments at the upcoming COP28 climate summit in Dubai, a UN spokesperson told Carbon Pulse. Also, they confirmed that it will still be possible to transfer and cancel CDM credits beyond a looming deadline, clearing up a point of confusion among stakeholders.

The market for nature-based carbon solutions is likely to grow to as much as $250 bln a year in the next decade, with an increasing focus on combining natural carbon sinks with technology based removals expected to help drive the voluntary market to as much as $1.5 tln by 2050, according to a report from Barclays bank.

U.S. President Joe Biden's administration will provide $1.2 bln in funding to advance the development of the nation's first commercial-scale direct air capture (DAC) facilities.

The Bahamas Office of the Prime Minister released a draft of the country’s proposed carbon market and GHG regulations, providing guidance for carbon credit sales, GHG reduction initiatives, and emissions allowances.

Carbon removal standard Puro.earth has opted to eliminate expiry dates for all its CORC durable carbon removal units, likely boosting future supply of the premium-priced carbon credits.

Iberdrola announced it has entered into the voluntary carbon market by launching a new company focused on nature-based projects as it targets mitigation upwards of 60 MtCO2e.

The United Nations Development Programme (UNDP) announced new open-source software to allow countries to manage national data and trade in carbon credits, bucking the existing trend of monolithic and siloed systems.

The Science-Based Targets initiative (SBTi) signaled a significant increase in validated corporate climate targets in its 2022 annual report, but flagged a lack of full coverage with progress reporting.

Indonesia Investment Authority (INA), the nation’s sovereign wealth fund, and climate advisory firm Pollination have teamed up to explore nature-based solutions opportunities. They signed an MoU with plans to develop projects that can generate carbon credits with biodiversity and community benefits that can be supplied to the domestic market as well as the international VCM.

Bayer, GenZero, and Shell India have teamed up in an initiative seeking to cut methane emissions from rice cultivation in India, aiming to cover 25,000 ha this year and quickly expanding from there.

Sydney-based Kakariki Capital is in the process of launching the Land Generation Fund, targeting a deployment of A$100 mln for earning ACCUs from environmental plantings.

EnergyAustralia has for several years offered customers the option to buy “carbon neutral” gas and electricity, with the company buying offsets – largely CERs – equal to the demand for those products. It has now been sued by Australian Parents for Climate Action, which claims the product branding is misleading.

A standardised way of grading carbon credits can establish transparency and consistency in the market while improving upon the current methods of existing ratings agencies, U.S.-based alternative asset manager Kimmeridge said in a whitepaper. 


Compliance: Mexico delays ETS launch, Canada proposes draft Clean Electricity Regulations

The Mexican cap-and-trade system will not begin its operational phase until some time next year due to the complex process of establishing final regulations, according to a government official. The environment ministry was slated to publish regulations for the inaugural 2023-25 trading phase in June after a three-year pilot period.

The small Mexican state of Colima is working on quickly rolling out a carbon tax, while the Tamaulipas government is planning to soon reinstate its own CO2 levy that will have stronger legal backing.

The first-ever Allowance Price Containment Reserve sale on August 9 in Washington state’s WCI-modeled cap-and-trade programme sold all 1.05 mln permits spread equally across the $51.90 and $66.68 price tiers, results from the Department of Ecology showed.

A group of Virginia environmental and faith organizations lodged a petition for appeal to block Governor Glenn Youngkin (R) from severing Virginia's RGGI-linked carbon market, arguing the administration does not have the constitutional authority nor has presented supporting evidence to do so.

Canada’s environment ministry announced its initial Clean Electricity Regulations (CER) to mobilize the country’s power grid to achieve net zero by 2035, including a series of measures that provide exemptions for units with carbon capture and storage (CCS) and can allow for continued, but limited, use of fossil fuels. The CER largely holds jurisdiction to regulate the CO2 emissions of provincial electricity generation, legal experts told Carbon Pulse, despite claims from the premiers of Alberta and Saskatchewan that the forthcoming climate policy is unconstitutional.

DevvStream Holdings has agreed to develop 250,000 carbon credits for compliance with output-based pricing systems in Alberta and British Columbia (BC) to be sold to an unnamed Canadian subsidiary of a large energy company. The initial three-year agreement can be extended to an additional 400,000 credits.  

Brazil President Luiz Inacio Lula da Silva earmarked an infrastructure investment of R$1.7 trillion ($346 bln), with an emphasis on decarbonising Brazil through a regulated carbon market and issuance of sustainable sovereign bonds

Greenhouse gas (GHG) emissions from sectors covered by the EU ETS showed varied signs of decrease in the first months of 2023 as total emissions across the 27-nation bloc as a whole fell by nearly three percent year-on-year, according to EU data.

An uptick in the forward hedging of EU carbon allowances is likely to have accounted for some of the recent strength in benchmark EUA prices, but analysts point to a bearish remainder of 2023 as power and industrial emissions continue to wane and some coal-to-gas fuel switching is also likely to weaken demand.

GHGs from the EU’s shipping sector are not likely to reach 2019 levels for the next two years due to lower demand for shipping services as well as the sector’s decarbonisation efforts, analysts predict, exerting additional downward pressure to an already bearish outlook for EUA prices in 2024.

HwaBao Securities, a subsidiary of China’s Baosteel, has agreed a deal with Shanghai-listed Dongzhu Ecological Environment Protection to buy all the CCERs the company will generate over the next three years. The deal comes as expectations increase that China’s offset programme is getting close to a relaunch, while the national ETS might be expanded to include steel as early as next year.

CCER relaunch speculations increased in mid-August as the trading platform that will handle transactions began accepting applications for account registrations.

CNOOC, one of China’s biggest state-owned oil companies, signed a 10-year deal with a local county in Inner Mongolia to buy 500,000 CCERs.

Human-induced regeneration projects, the biggest methodology in the Australian market, has been under fire for more than a year, and the Clean Energy Regulator has now announced it will introduce an additional step of auditing for HIR projects to ensure the integrity of credits generated.

The New Zealand parliament has passed a bill that that will see a reduction of around 800,000 in the annual free allocation of NZUs, a move that saw NZUs rise to a five-month high of NZ$66.

New Zealand has been planning to introduce a separate pricing mechanism for the agriculture from 2025, but the Labor party government has now proposed to delay that by two years, saying it need more time. The opposition National party, now favourites to win the October election, says it won’t introduce such a scheme until 2030. Agriculture accounts for about half of NZ’s emissions.


Finance: Amazon nations put forth unique financing mechanisms, but fall short on deforestation target

Eight countries home to the Amazon rainforest have agreed to advance innovative financing options to help protect the massive territory, according to a joint declaration that failed to include a pledge to end deforestation by 2030.

The Belem Declaration includes a call by the countries of the Amazon Cooperation Treaty Organization (ACTO) - Bolivia, Brazil, Colombia, Ecuador, Guyana, Peru, Suriname, and Venezuela - to pursue new avenues for climate finance, specifically citing debt-for-climate swaps with developed countries as one example of such an option.

Gabon’s national debt has been restructured under a so-called “Blue Bond” in the world’s second-largest debt-for-nature swap. 

Kenya will face a shortfall of more than a $1 bln to meet its climate change and forestry strategic plan over the next five years, the Ministry of Environment said.

Zimbabwe and Dubai-headquartered project developer, Blue Carbon, signed an MoU for investment in emissions mitigation activities in the African country.

Germany’s energy-intensive companies that are part of the domestic fuel emissions trading system will be partially compensated for any risk of carbon leakage caused by higher fuel prices, as the European Commission approved the €6.5 bln scheme.

Houston-based oil and gas firm Occidental has purchased the Canadian direct air capture company Carbon Engineering through a subsidiary for $1.1 bln.

Singapore and Chile have signed an MoU to cooperate on carbon markets under Article 6 of the Paris Agreement, including plans to explore potential cooperation with third-party countries.

South Korea has commissioned trading firm Ecoeye to develop three projects that can generate Paris-aligned credits. The projects will be based in Bangladesh, Cambodia, and Vietnam. The Korean government also recently signed a broad environmental MoU with Uzbekistan that includes cooperation on Article 6.

Global oil, gas, and coal companies are well off track to align their production output with Paris targets, according to a study by the University of Queensland, Oxford University, Princeton, and the Climate Accountability Institute. Of over 140 companies surveyed, 60% were on track to emit far too much – some by more than 60% above their fair share of emissions.

South Korean shipping firms could face a total carbon pricing bill of some $3.6 bln from initiatives and new policies underway under IMO and in the EU, according to the Korea Maritime Institute.

Japan has identified four more projects that will receive government co-funding under the JCM. Three of them were located in the Philippines, with the fourth in Mexico. In total they are expected to generate around 45,000 credits per year.

Investor TPG Rise Climate announced it has acquired a majority stake in UK-headquartered refrigerant capture company A-Gas, allowing it to gain a stronger footing in the U.S. carbon offset market.


Stay in the know

Stay informed with the latest news, insights, and data on the carbon markets with Carbon Pulse’s Climate Markets Update, a biweekly publication brought to you exclusively by CME Group.


All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2024 CME Group Inc. All rights reserved.