Source: Reuters
The carbon market is witnessing a growing momentum as businesses globally embrace sustainability, with increasing demand for carbon credits and emissions trading mechanisms to address climate change concerns. Here are some of the emerging insights to look for in 2024:
New Players Entry in EU ETS:
The shipping sector has commenced carbon emissions payments within the European Union’s carbon market. Inclusion of maritime emissions in the EU Emissions Trading System is expected to result in a surplus of allowances in 2024-25, transitioning to a deficit from 2026 onward.
Global Expansion of Carbon Tariffs:
As 2024 unfolds, European importers face increased intricacies as the EU introduces the Carbon Border Adjustment Mechanism (CBAM) for sectors including industrial metals, fertilizers, cement, electricity, and hydrogen originating from non-EU sources. The UK has also confirmed its carbon border adjustment mechanism, with plans to refine and potentially legislate the scheme throughout the year. Simultaneously, there are expectations for Canada and Australia to announce their respective carbon tariffs in 2024, further expanding the reach of such measures.
Carbon Market Challenges and the Role of Independent Players:
The carbon offset market faced challenges in 2023, with a drop in credit issuances and retirements causing concern. Despite high hopes for COP28 and Article 6 discussions, progress was slow. Due to delays in Article 6.4's carbon crediting mechanism, the growth of the carbon offset market in 2024 relies heavily on independent players.
Integrity in Carbon Market:
In 2024, carbon markets are moving towards universal standards, undeterred by 2023's criticisms. Notably, major players in the Voluntary Carbon Market, including Integrity Council for the Voluntary Carbon Market (ICVCM), Voluntary Carbon Markets Integrity Initiative (VCMI), and Science Based Targets initiative (SBTi), are collaborating to rebuild trust and confidence in the market. A comprehensive market integrity framework is being established to guarantee quality, transparency, credibility, and accountability throughout the entire value chain of the Voluntary Carbon Market (VCM).
A Shift Towards High Quality Carbon Credits:
In the face of controversies, carbon market buyers remain committed to investing in carbon and biodiversity credits. Seeking to make a meaningful environmental difference, these buyers are willing to pay a premium for high-quality credits. Insights from 'The State of the Voluntary Carbon Market' in 2023 indicate an evolving market, with major players gearing up for a more resilient 2024. The report also sheds light on carbon pricing trends, revealing a surge in carbon credit prices from $4.04 per tonne in 2021 to $7.37 in 2022 – the highest in 15 years.
Increased Demand for Nature-Based Carbon Credits in 2024 :
In the coming year, the demand for nature-based carbon credits is poised for a remarkable rise, with over 50% of the carbon credit demand in the financial services sector focusing on nature-based credits.A key driver is the heightened awareness of biodiversity conservation and habitat restoration, fueled by the concerning rate of species decline. Additionally, there is widespread acknowledgment that consumers actively support nature-based conservation as they become more informed about environmental protection needs.
Growth in Compliance Carbon Markets:
In the upcoming year, a surge is expected in compliance carbon markets. More countries are embracing mandatory carbon pricing for the transport and fossil fuel upstream sectors. With increased government-led initiatives, there will be consistent carbon price signals across broader sectors, expediting the global transition towards a low-carbon future.
Resources:
Comments