In this report

VOLUNTARY: Verra says it is addressing REDD criticisms from academic study, Calyx Global partners with in carbon credit rebalancing project

Verra says it is addressing criticisms of REDD methodologies detailed in a research study by the University of California’s Berkeley Carbon Trading Project that found four of the most popular forest protection offset methodologies from Verra – VM0006, VM0007, VM0009, and VM0015. This gave excessive flexibility and discretionary space to project developers, resulting in exaggerated climate impacts and overestimation of carbon credits issued.

Calyx Global has partnered with U.S.-headquartered fund manager on a pilot “Risk-Adjusted Portfolio Rating” scheme. This is to help buyers use the existing stock of legacy carbon credits from projects that had overestimated issuance and had earned a low rating from the agency.

IndigoAg, a U.S.-based agricultural technology firm providing carbon services and products, has raised over $250 million to advance its suite of offerings for sustainable agriculture amid reports of a steep drop in the company's valuation. Contrary to the report, the company noted that its net revenues for 2022 grew 40% year-on-year (YoY) and revenues for the first seven months of 2023 grew 90% YoY.

Bills to mandate disclosures of Scope 1-3 GHG emissions, climate-related financial risk, and voluntary carbon credit project info for buyers and sellers passed the California legislature. Governor Gavin Newsom has said he will sign the Scope 1-3 emissions disclosure bill.

Jiangxi Fenglin, a Chinese forestry firm, has signed a deal with the Zambian government that will let it develop nature-based carbon credit projects at an area spanning four million hectares – 5% of Zambia’s total land mass. The deal could result in over 23 million credits annually over two decades, or 930 million during the project lifetime.

Chinese trading firm Timing Carbon and China Creation Ventures have teamed up to launch a cookstove project in Bangladesh that can generate some 400,000 VCUs annually.

Tokyo-based startup Spatial Pleasure and Living Lab Ventures, the venture capital arm of Sinar Mas Land, have launched a cooperation to begin developing carbon projects in Indonesia’s transportation sector.

Meanwhile, Sumitomo Mitsui Banking Corporation (SMBC) has become one of several Japanese banks to partner with startup Bywill to introduce services to its clients that involve access to domestic J-Credits.

Hitachi’s IT solutions arm is planning to launch a new business next year that provides comprehensive support for the creation and trading of forest-based carbon credits.
Investment in the voluntary carbon market could slow in the next two years after a surge of money flooded in over the last two-and-a-half years when carbon credits prices hit a peak, according to Trove Research. It said $3 billion of capital has been announced for investment in the VCM in 2024 and 2025, an average of $1.5 billion a year, although this figure is only based on a survey of 30 respondents and the value could be higher. That is a drop from the $18 billion of capital that was raised or committed over the last two-and-a-half years between January 2021 and June 2023.

Norway’s sovereign wealth fund, which oversees $1.4 trillion, published stricter climate action guidelines for companies in which it invests, highlighting that climate risk equates to financial risk but also offers opportunities. Articulating its more stringent stance on corporate utilization of voluntary carbon markets, it emphasized that while credits can aid in financing global mitigation and carbon removal initiatives, companies should primarily focus on reducing their own emissions, using voluntary credits as a supplementary measure to signal high climate ambitions.

A study compiling the best companies in terms of their climate leadership has found that 16 of the 27 highest performing firms are based in Europe, while those involved in the fossil fuel industry still failing to prioritize action. The 2023 Corporate Climate Policy Engagement Leaders report, produced by London-based think-tank InfluenceMap, identified the companies around the globe that have achieved best practice in climate policy advocacy.

FINANCE: Companies that report yearly GHG output earn more, as $2.7 trillion needed to align with Paris target

A study by carbon finance organization Climate Impact Partners found that Fortune Global 500 companies reporting YoY emissions reductions earn on average nearly $1 billion more in profits than their peers who don’t, while companies with an emissions reduction target of 2030 or sooner also perform better in curbing their operational emissions.

Wood Mackenzie’s “Energy Transition Outlook” reported a base case scenario that an annual investment of $1.9 trillion is required to decarbonize the world’s energy sector – a figure that escalates to U.S.$2.7 trillion should the objective pivot to aligning with the Paris Agreement’s 1.5C global warming limit.

Galvanize Climate Solutions announced the final close of its Innovation + Expansion Fund at over $1 billion – the closing of one of the largest climate-focused funds to date – and will target investments in early- and growth-stage startups that drive timely decarbonization.

DevvStream Holdings Inc has signed a $213 million deal with Focus Impact Acquisition Corp. (FIAC) – a special purpose acquisition company (SPAC) that trades on the Nasdaq stock exchange – to help it go public via merger.

Peru will redirect $20 million of its debt to the U.S. to spend on conservation efforts in some of the most biodiverse areas in the Peruvian Amazon, with environmental groups including Conservation International and WWF contributing some $3 million to the arrangement.

After several forays into Africa, UAE’s Blue Carbon in September participated in a four-day workshop with Pakistan’s climate change ministry, looking for opportunities to cooperate under Article 6 of the Paris Agreement. They were particularly looking for projects in agriculture, forestry, and other land use (AFOLU) that might result in carbon credits.

Australia’s Labor government has cancelled more than 700 million Kyoto credits that has been sitting in its national registry, to ensure that a future conservative government would not be able to use the Kyoto units towards Australia’s strengthened Paris commitments.

South Korean developer Ecoeye and landfill gas firm KR Consortium have signed a joint agreement with the ambition to develop 10 million Article 6 carbon credits by 2030. They will start with weighing two landfills in Thailand before expanding activities across Southeast Asia and potentially elsewhere as well.

India has the capacity to earn $12.5 billion annually by 2030 and $200 billion by mid-century through the Paris carbon market if it continues to increase its NDC ambition over time and phases out inefficient subsidies, according to industry group IETA.

The UK government will provide £500 million to keep Tata Steel's Port Talbot steelworks – the country’s largest ETS emitter – open and to reduce its carbon footprint by switching its energy source from coal to electricity, although doing so will likely lead to thousands of job losses.

French oil and gas major TotalEnergies launched a call for tenders for the annual production of 500,000 tonnes of green hydrogen, which will fall under the firm's strategy to decarbonize its ETS-covered European refineries by the end of the decade.

COMPLIANCE: Suriname to offer first sovereign REDD credits for Paris trade, as Article 6.4 implementation progresses

The first REDD sovereign credits available for international trade under the Article 6 mechanism of the Paris Agreement are to be offered by Suriname, a precedent that is expected to be widely followed by other rainforest nations around the world. The South American country is issuing 4.8 million V21 credits checked by the UNFCCC, which will be sold on a new platform by the 52-strong Coalition for Rainforest Nations (CfRN).

The UN body responsible for guiding the Paris Agreement's Article 6.4 carbon crediting mechanism made significant progress at its penultimate meeting of the year. Observers noted they had never seen such consensus among the group, but ultimately failed to adopt final texts on methodological guidance after running out of time, leaving crunch discussions for its final meeting.

The Q3 RGGI cap-and-trade auction sold all 21.9 million V21-23 RGAs on offer at the September 6 sale for $13.85, just five cents shy of its all-time record settlement in June 2022. This was in-line with broad market expectations near secondary market values, although compliance participation remained subdued.

The August auction for Washington’s WCI-modelled cap-and-invest program sold all 8.6 million V23 allowances at a new high of $63.03 and triggered its second reserve sale this fall. Though permit values tumbled on the secondary market after the Department of Ecology (ECY) revealed millions of these forthcoming cost containment allowances would be sold exclusively at the scheme’s lower reserve tier price – well below recent levels.

China’s environment ministry has approved, in principle, a set of administrative measures setting out the basic framework of the country’s national voluntary program, bringing the relaunch of the CCER scheme a big step closer after it was suspended six and a half years ago.

China has also released basic rules for the operation and trading of spot power contracts, considered essential in making its national ETS more effective as a liberalized power market would give generators more capacity to pass on their carbon cost.

In a bid to boost demand, South Korea has proposed to loosen rules in its ETS concerning allowance carryovers. Currently those with surplus KAUs are only allowed to carry over the same amount of KAUs as they sell into the market, while emitters needing to purchase permits in the market can’t bank any at all. This has been stifling demand, and the environment ministry is now seeking to significantly ease banking restrictions.

Cement producer Boral has become the latest to come out in support of an Australian Carbon Border Adjustment Mechanism (CBAM), after the government recently launched a public consultation process to consider whether a CBAM would be an appropriate tool to address carbon leakage.

The European Commission is set to introduce EU ETS allowance transaction limits as part of security measures for the market's Union Registry, with a regulation entering into force this month including a provision to charge a new fee for registry access. Until now, there has been no limit on the number of allowances transacted in the Union Registry.

European Commission President Ursula von der Leyen confirmed her commitment to the European Green Deal in her last annual speech to the European Parliament before the EU elections next June though her focus was less on climate action and more on the need to support European industry on their decarbonization journeys.

Pursuing an ambitious 2040 emissions reduction target will improve the fairness of the EU’s global contribution to climate action but the bloc needs ETS prices above €100 today to prevent costly price spikes in the coming years. This was told by experts at a roundtable event to help EU officials decide on a proposal for a 2040 goal to keep on track towards the bloc's binding climate goal of reaching net zero emissions by mid-century.

EU shipping companies are facing a major challenge when trying to chart a course to purchasing EU ETS allowances, with some smaller market players still not prepared for the sector’s entry next year as revised data suggests emissions for the sector have already climbed above pre-pandemic levels.

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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.

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