Voluntary CO2 trading grew in 2012, albeit at lower prices

By Wayne Barber, Chief News Analyst, GenerationHub

A recent report from Forest Trends Ecosystem Marketplace and Bloomberg New Energy Finance (BNEF) finds that voluntary carbon markets worldwide grew in 2012, topping 100 million metric tons.

In 2012, voluntary actors contracted 101 million tonnes (metric tons) of carbon offsets (MtCO2e) for immediate or future delivery. That’s 4% more than in 2011. Market value, however, decreased 11% to $523m as offset prices fell slightly for several popular project types.

Suppliers predict the CO2 market value could reach $1.6bn to $2.3bn in 2020, according to the report: “Maneuvering the Mosaic: State of the Voluntary Carbon Markets 2013.”

The 126-page study was made public July 23 on the BNEF website. Molly Peters-Stanley and Daphne Yin are listed as the primary authors of the document.

The study defines “voluntary” as all purchases of carbon offsets not driven by an existing regulatory compliance obligation. Transactions are deemed to occur at the point that offsets are contracted.

The report also indicated 90% of the offset volume was contracted by the private sector. Also most forward contracts, spanning multiple years, were negotiated between project developers and offset end users.

The report notes that voluntary offsets run the gamut from parties that distribute clean cook-stoves and water filtration devices to more traditional projects like wind energy and fuel switching. Demand surged for carbon offsets from certified forestry projects.

In 2012, offsets from renewable energy projects were the most popular among voluntary offset buyers, as the source of 26 MtCO2e or 34% of transacted offsets that were associated with a project type.

Wind energy was behind 15.3 MtCO2e of transacted offsets – 35% less than in 2011, as some buyers turned their attention to other inexpensive offsets sourced from large hydropower projects.

Offset buyers in Europe and North America expanded their offset programs in order to “demonstrate climate leadership,” according to the report.

Where governments have included offset provisions within their broader climate regulations, demand ranged from steady (in California) to growing (in Australia) as companies prepared for compliance, according to the report.

“Because of the market’s lack of liquidity and predictability, historical trends presented in this report should be viewed only as a starting point for understanding demand in the current year – which continues to evolve as both offset buyers and suppliers innovate new ways to mitigate GHGs [greenhouse gases], influence policy, and communicate their purchases and successes,” according to the report.

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