The Voluntary Carbon Market

The voluntary carbon market (non-compliance) has experience average growth from 2008 to 2012 of 13 %, with suppliers predicting market value could reach $1.6 to $2.3 billion in 2020. In 2013, 101 million tons of carbon were traded at a value of $523 million, with trade decreasing last year to 76 million tons prices at $379 million, with the price of carbon also decreasing. Forestry projects made up one third of this trade.

The drop in activity last year has been attributed to a decrease in pre-compliance activity in anticipation of regulation. E.g. the compliance market in California has taken off, while Australian scrapped their carbon tax. However, Ecosystem Marketplace Director Molly Peters-Stanley notes that “The total drop that we saw in the marketplace last year is not necessarily related to a decrease in purely voluntary demand for offsets. If we were to attribute a proportion to the actual purely voluntary activity in the marketplace that fell, it would be about 5%, versus the 26% that we have to report as the headline numbers”.

Interestingly, Christian Dannecker, Director of Forestry at South Pole Group notes “There are good opportunities for those that add value and bring some new ideas to the market. There is growth, but it’s much more diversified into different products and different transaction types than before, it won’t be only VERs (verified emissions reductions).”

TFS Green also notes “The voluntary market may at present be smaller and less liquid than the compliance market, however, general market opinion is that the wider scope of the voluntary market, and growth led by the private sector, not public policy, means that it has a strong potential to outstrip the mature market size of the compliance regime.”

The World Bank estimated the size of the compliance market at $176 billion in 2011.

This sets the scene nicely for Teratrees.

Sources:

  • Forest Trends Ecosystem Marketplace and Bloomberg New Energy Finance, 2013. 
  • The Future of Global Carbon Markets, Ernst and Young 2012
  • World Bank