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Raising Ambition: State of the Voluntary Carbon Markets 2016
27 May 2016

Germany is a flurry of climate action this month. In Bonn, climate negotiators are haggling over how to operationalize the Paris climate agreement. In Cologne, hundreds of private and public sector stakeholders are gathering for the 13th annual Carbon Expo to find ways to scale up carbon markets – with or without the help from the folks in Bonn.

It’s along the River Rhine (well, in a conference hall near it…) that Ecosystem Marketplace is launching our newest report, Raising Ambition: State of the Voluntary Carbon Markets 2016, which is available for download here. This year’s report documents a 10% increase in voluntary demand for carbon offsets in 2015 as mainly private sector actors sought to neutralize their unavoidable emissions outside and ahead of carbon regulation. These voluntary buyers hailed from 35 different countries and transacted a total of 81.4 million tonnes of carbon dioxide equivalent (MtCO2e) last year.

They overwhelmingly looked for offsets developed under a third-party standard and purchased tonnes from a wide range of project types, led by wind (12.7 MtCO2e transacted) and avoided deforestation (11.1 MtCO2e). Alongside the growth in the compliance cap-and-trade market in California, voluntary action in the United States flourished as U.S. buyers purchased 16 MtCO2e – the most of any country.

However, the growth in offset demand came at the lowest average prices ever tracked in Ecosystem Marketplace’s report series: $3.3/tonne, for a total market value of $278 million. Though prices ranged widely – from as little as $0.1/tonne to as much as $44.8/tonne – average prices dropped across almost all project types, and suppliers reported a buyers’ market in most regions. Offset retirements reached a record high of 39.5 MtCO2e in 2015, reflecting the fact that more end-users are taking this final step, but still new issuances outpaced them slightly, contributing to the pile-up of existing supply.

Still, offset suppliers are hopeful that a number of new initiatives – some directly connected to the Paris Agreement, and others outside of it – could grow offset demand in the future. To date, 157 companies, from Coca-Cola to Sony, have signed up for the Science-Based Targets initiative which aims to get companies to commit to emissions reductions targets in line with a 2˚ C temperature rise threshold. The World Bank’s Carbon Pricing Leadership Coalition, officially launched in December at the Paris talks, includes 74 countries and 1,000 companies that support carbon pricing. Both of these high-profile lists may be a good place to start in terms of drumming up voluntary offset demand.

Voluntary carbon market participants are also increasingly engaging with emerging compliance programs to see if they might adopt emissions reductions methodologies originally developed for voluntary buyers. The in-progress market-based mechanism for airline emissions looks somewhat promising on this front, as does South Africa’s upcoming carbon tax.

The production of this report would not have been possible without our Donors the MacArthur Foundation and Good Energies, our Sponsors BioCarbon PartnersEco-Act, andInfiniteEARTH, and our Supporter The Climate Trust. For information about how to support further research on ecosystem services finance, click here.


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