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Voluntary carbon demand trended lower while new supply slowed

Voluntary carbon markets credit supply (issuances) and demand (retirements) (million carbon credits)

Sources: American Carbon Registry, Climate Action Reserve Registry, Verra Registry and Gold Standard Registry as of January 10, 2025

• Approximately 120 million credits were issued from July to December 2024, 12% higher than the same period of 2023 (107 million credits). Per month, 20 million credits were issued on average, 2.2 million more per month than were issued over the same six months last year.  Yet, for the full year, the growth in new carbon supply slowed from last year, as 2024 new supply fell 1% from 2023 supply.  
• A total of 55 million credits were retired from July to December 2024, 37% lower than the same period of 2023 (87 million credits). On an annual basis, 142 million credits were retired in 2024, a 13% decline from the full year of 2023.  The seasonality of buyer demand was expected in 2024, with higher volumes of retirements in early months, lower buyer activity mid-year, and then higher demand again in December.  In 2024, December buying was less than half of the volume of credits retired in December of 2023.   

Nature-based solutions credits were one third of the overall carbon credit retirements during July to December 2024.  Energy projects continue to dominate both carbon credit demand and new supply

Voluntary carbon market credits monthly issuances and retirements by project type (million carbon credits)

Issuances

Retirements

Sources: American Carbon Registry, Climate Action Reserve Registry, Verra Registry and Gold Standard Registry as of January 10, 2025 

• Energy projects continue to be the largest credit types issued and most often the largest credit type demanded, as measured by credit retirements.  In the 2H of 2024, energy project credit issuance was 55% of the total new supply of credits and 51% of total retirements.   The gap between retirements and new credit issuance of energy credits widened in the 2H of 2024 compared to the same period last year, as less new credits were issued compared to the volume of credits retired.  The announcement by the IC-VCM in early 2024, not approving energy credits for CCP labeling may impact how project developers and buyers view energy credits in the future.   
• Nature-based solutions (NBS) projects issued 27 million credits in the 2H of 2024, contributing 24% of the total credits issued over the period.  The volume of NBS credits issued in the 2H of 2024 is a 53% increase in the volume of NBS credit issuance which occurred during the same period of 2023. 
• The demand for NBS credits in the 2H of 2024 fell in both volume and share of total credits retired.  Nature-based credits were 34% of total retired credits in the 2H of 2024, at 18.4 million, down from a 44% share of retired credits, and a volume of 38 million, during the same period last year.  Some buyers report taking a wait-and-see approach as new methodologies are rolling out from key VCM registries, while waiting on decisions from IC-VCM on specific project CCP approvals.
• Projects in the Other category, which include carbon projects such as landfill gas capture, and industrial gas substitution were 21% of total credit issuance in the 2H of 2024, at 25 million credits, while retired Other credits at 8 million credits were 15% of total retirements.  The approval of the first CCP-aligned methodologies in the landfill and ozone depleting substances sectors may be increasing the desire to issue credits  from those  project types. 

Voluntary carbon market prices mixed during July to December 2024

Monthly average prices ($/tonne)

Note: Allied Offsets develops weekly VCM price indexes based on asking prices reported by over 20 brokers and researchers. The Allied Offsets 500 Index represents reported prices for the 500 largest retired projects in the VCM. Nature Based Forestry represents the most retired forest and agriculture based projects in the VCM (quantity of projects undisclosed). The Climate Action Reserve (CAR) and the American Carbon Registry (ACR), North America and VCS and Gold Standard each represent the reported price for the most retired projects corresponding to that category (quantity of projects undisclosed).

Source: Allied Offsets Price Indexes as of January 10, 2025. Available at: https://alliedoffsets.com/prices-2/

• Global voluntary carbon market price indices over the past six months were mixed.  Credit prices for VCS and Gold Standard projects moved sideways during the 2H of 2024, then dropped lower by December.  Nature-based solutions credits and the Allied Offsets 500 price series (representing 500 of the largest projects retired in the VCM) trended upward over the past six months.  North American credit prices were volatile over the July to December period, with average prices ending the year in December lower.   
• Average prices for global VCM transactions (inclusive of REDD+, all NBS, energy, and other credit types within all geographies)  were at $3.61 per tonne in December 2024 as reported by Allied Offsets, the same average price in June of this year. However, significant differences were observed by geography and project types.  Prices for North America Improved Forest Management projects which offered removal credits were recorded between 19 and $24 per tonne, while ARR project credits were seen between $25 to $40 per tonne.  

Compliance carbon prices end the year flat to up

Compliance Carbon Prices, July 2024 to December 2024 (domestic currency $/tonne)

• California Air Resources Board (CARB): California Carbon Allowance (CCA) prices settled in November 2024’s California-Quebec joint auction (#41)  at $31.91 per tonne, while August’s auction prices settled slightly lower at $30.94 per tonne.. The auction cleared in both August and November, yet the total qualified bids per total allowances available for sale, a measure of demand, was low. November 20^th’s auction was the first auction following the full 3-year compliance period. California’s compliance scheme requires covered entities to provide allowances equal to 30% of their previous year’s emissions by a November 1^st deadline, and at the end of the full compliance period (3-year cycle) entities must provide allowances which cover the entire 3-year cycle. Therefore, November’s lower relative demand was expected.  The low price levels would seem to be a result of uncertainty as CCA release of final new regulatory rules was delayed, and the market awaits potential changes to protocols and proposed price increase to the cost-containment provisions, among other changes. Direct environmental benefits (DEBs) carbon offsets – offsets that deliver a direct environmental benefit to the State of California - were double the offset price of non-DEBs during the July to December  2024 period ($28.90 per tonne for DEBs vs $15.25 per tonne for non-DEBs). The historical price spread between CCAs and DEBs collapsed in 2024, as CCA prices fell  
• Washington Cap and Invest Program: Late 2024 witnessed a reboot of confidence in the program as Ballot initiative 2117, seeking to repeal the Washington Climate Commitment Act, did not pass during the state’s November election.  WCA activity at December’s auction increased and the auction settlement price for 2023 and 2024 vintages was $40.26 per allowance.  
• AU Emissions Trading Fund (AU ERF): The value of Australian Carbon Credit Units (ACCU) Scheme reached A$1.1 billion in 2024, an increase from A$840 million in 2023. Australia’s emission scheme is now the fifth largest emissions compliance carbon market in the world, by traded value. Australian credit (ACCU) prices over the July to December period began flat, to then move up to a 31-month high of $42.55/tonne for generic ACCUs in November driven by compliance buying that month. Several program reporting deadlines occurred on October 31 – both the National Greenhouse and Energy Reporting and the Climate Active reporting, likewise, October marked the deadline for trade exposed facilities to apply for discounted baseline declarations – with these deadlines passed, more entities entered the market in November.
• NZ Emissions Trading Scheme (NZ ETS): The average price of New Zealand credits (NZUs) from July to December decreased by 6% from the average credit prices over the prior six months,  falling to NZD 62 per tonne by December 2024. Since late August, NZU prices have stabilized above NZ$60/mt, largely due to authorities maintaining price control settings and updating unit limits for the next 5 years, as is required each year, yet set to release lower volumes at auction, which is in alignment with recommendations from the Climate Change Commission.
• Brazilian National Congress approved a compliance market (Brazilian Emissions Trading System (SBCE) for the country that would impose emissions limits on heavy emitters and have the ability to trade carbon credits to meet regulatory requirements. Brazil’s pending compliance market is particularly important given the vast natural capital wealth and critical ecosystems contained within the country’s borders.