- The volume of transactions in voluntary carbon markets hit a seven-year high in 2018, according to “Financing Emissions Reductions for the Future: The State of the Voluntary Carbon Markets 2019,” a new report released today.
- The report identifies transactions equivalent to 98.4 million metric tons of carbon dioxide (MtCO2e), with a market value of $295.7 million. This represents a 52.6% increase in volume and a 48.5% increase in value over 2016.
- The increase was led by a growing awareness of “nature-based solutions” for climate resilience, which drove a 264% increase in volume of offsets generated through Forestry and Land Use activities and made REDD+ the most popular offset type for the first time since 2015.
- This surge in volume continued to accelerate in 2019, according to market experts.
DECEMBER 5, 2019 | MADRID, Spain
Airlines, oil companies, and individuals are using voluntary carbon markets to achieve net reductions in greenhouse gas emissions at levels not seen in seven years, according to Financing Emissions Reductions for the Future: State of the Voluntary Carbon Markets 2019, which was published by Forest Trends’ Ecosystem Marketplace initiative today at year-end climate talks (COP25) in Madrid, Spain.
“Companies feel an urgency to reduce their emissions, but they can’t eliminate them internally overnight,” said Michael Jenkins, President and CEO of Forest Trends. “Many are now using voluntary carbon markets to offset those emissions they can’t eliminate until they can transition to new technologies.”
This is the 12th edition of the report, which Ecosystem Marketplace first began publishing in 2007. It draws on extensive market data gathered from the years 2017 and 2018, coupled with interviews to interpret findings and identify trends in the current calendar year.
For 2018, the report documents transactions equivalent to 98.4 million metric tons of carbon dioxide (MtCO2e) for a total market value of $295.7 million. This represents a 52.6% increase in volume and a 48.5% increase in value over 2016, which is the last year an annual survey was conducted.
Market participants told Ecosystem Marketplace that market growth has accelerated even further in 2019, although full market-wide data for 2019 will not be available until 2020.
The increase in transacted volume was driven by offsets associated with “nature-based solutions,” which are projects that reduce emissions by improving management of forests, farms, and fields. Volume in the Forestry and Land Use sector, for example, grew 264%, from 13.9 MtCO2e in 2016 to 50.7 MtCO2e in 2018, while volume in all other offset types grew just 21%.
Prices remained relatively low as developers worked through inventory that had been accumulated in previous years, although several market participants reported rising prices towards the end of 2019.
Within the Forestry and Land Use sector, volume from offsets associated with REDD+ (Reducing Emissions from Deforestation and Degradation, plus enhancement of carbon stocks) increased 187%, from 10.6 MtCO2e in 2016 to 30.5 MtO2e in 2018, while volume of offsets associated with afforestation/reforestation (A/R) increased 342%, from less than 2 MtCO2e in 2016 to 8.4 MtCO2e in 2018. Geographically, new REDD+ volume was concentrated in Peru, which accounted for 19.7 MtCO2e of the increase. New A/R volume was more evenly distributed around the world.
In interviews, market participants credited the increase to a growing desire on the part of consumer-facing companies to exceed regulatory climate requirements, rather than a desire to acquire inventory for compliance markets such as the International Civil Aviation Organization’s (ICAO) emissions trading program, CORSIA. CORSIA becomes active in 2021 but will not reach full-scale operation until 2027.
Instead, interviewees repeatedly stressed the emergence of major voluntary buyers, such as Shell, which has committed to invest $300 million in offsets associated with nature based solutions from mid-2019 through mid-2022. British Airways and Air France, meanwhile, have announced they will offset emissions from all domestic flights beginning next year, while EasyJet announced in November that it will offset all emissions from its use of jet fuels immediately. EasyJet has confirmed to Ecosystem Marketplace that it expects to purchase 7.5 MtCO2e through September 2020.
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Quotes from Contributors
“We’re excited to be launching Ecosystem Marketplace’s 2019 State of Voluntary Carbon Markets Report at ICROA’s COP25 Workshop in Madrid this week. As we’ve closely witnessed these markets evolve over since 2006, in 2018 transactions hit a 7-year high– led by a growing awareness of Natural Climate Solutions. This, and the other results from EM’s 2019 Carbon Survey, speak to how the world is in the present-day gearing up for the official implementation of the Paris Agreement in 2021.”
Stephen Donofrio, Director of Ecosystem Marketplace and a contributor to the report.
“In our interviews, it became clear how much all these news stories about tree-planting drove the demand for nature-based carbon offsets. But it’s important to remember that tree-planting is just a small part of natural climate solutions. It will take decades for all these saplings to mop up the carbon that the fires in the Amazon and Congo are releasing right now, and they won’t even do that if they’re not planted right so they can grow into trees. Nature-based solutions are complicated, and the next challenge for us in the media is to focus on making sure it’s done right.”
Steve Zwick, Managing Editor of Ecosystem Marketplace and a contributor to the report
“We used to call Natural Climate Solutions ‘the forgotten solution,’ because they can deliver more than a third of the mitigation needed to meet the Paris Agreement’s primary target but get only 3 percent of the dedicated climate finance. It looks like they’re starting to get the attention they deserve in voluntary carbon markets.”
Patrick Maguire, Senior Program Manager of Ecosystem Marketplace and a contributor to the report
“It’s great to see nature-based solutions getting so much attention, but this doesn’t mean we can ease up on reducing industrial emissions. We need both.”
William Merry, Forest Trends Senior Associate and a contributor to the report
Quotes from Partner Organizations
“Our partnership with Forest Trends is an exciting and essential collaboration to scale natural climate solutions. Together we are using the power of markets and private sector value chains to create a better future. Nature – particularly forests – is an important part of accomplishing the goals of the Paris Agreement and stabilizing a changing climate. If ever there was a time for trees, now is that time.”
Dan Lambe, President, Arbor Day Foundation
“American Carbon Registry values the depth of information that Ecosystem Marketplace’s reports bring to carbon market participants. The analyses track the evolution of market policies and trends, which offers transparency into an otherwise opaque space.”
Mary Grady, Deputy Director, American Carbon Registry
“One of the great things that the State of the Voluntary Carbon Markets reports do is document the ups and downs of the voluntary market over time. That’s been very useful because they validate what we see on a daily basis.”
David Antonioli, Chief Executive Officer, Verra
“The positive trends in the market indicate that more and more entities are deciding to show leadership and respond to the pressing calls for climate action. It is very good to see this confirmed in Ecosystem Marketplace’s Report which has established itself as the most comprehensive source of information and analysis on the voluntary carbon market.”
Antoine Diemert, Director, International Carbon Reduction & Offset Alliance (ICROA) & Voluntary Markets, International Emissions Trading Association (IETA)
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About Forest Trends’ Ecosystem Marketplace
Ecosystem Marketplace, an initiative of the non-profit organization Forest Trends, is a leading global source of information on environmental finance, markets and payments for ecosystem services. As a web-based service, Ecosystem Marketplace publishes newsletters, breaking news, original feature articles and annual reports about market-based approaches to valuing and financing ecosystem services. We believe that transparency is a hallmark of robust markets and that by providing accessible and trustworthy information on prices, regulation, science, and other market-relevant issues, we can contribute to market growth, catalyze new thinking, and spur the development of new markets and the policies and infrastructure needed to support them.