Voluntary Carbon Markets
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is one of the most clearly defined industry-wide voluntary schemes. Airline operators taking part in CORSIA have pledged to offset all the CO2 emissions they will produce above a baseline 2019 level.
Airlines intend to do this—at least in part—by purchasing carbon credits emitted by projects certified by international agencies and recognized as CORSIA-eligible. The first part of the scheme from 2021 to 2026 is voluntary. From 2027, CORSIA will become mandatory for almost all international routes. While CORSIA credits are one of the ways through which the aviation industry plans to achieve its ambitious climate goals, it is not the only way. The aviation industry has also committed to technology, operations and infrastructure advancement as well as focus on fuel efficiency.
Platts collects bid, offers and trades for carbon credits that are considered eligible for the CORSIA market and that have been certified by the following standards: The Gold Standard, Climate Action Reserve (CAR), Verified Carbon Standard (VCS), Architecture for REDD+ Transactions, and American Carbon Registry.
Price indications are collected directly from market participants during every trading day.
The CEC reflects the spot market for specific vintages and for delivery in the current year (spot prices). It does not reflect price differences caused by project co-benefits or location.
These credits are measured in $/mtCO2e, and each one is made of a minimum of 5 lots of 1,000 CO2e units.
The CEC price represents the most competitive way at which end-buyers can fulfill their CORSIA offsetting goals on a given day and therefore it usually reflects some of the most competitively priced credits being traded in the market, be it from a wind power plant or from a reforestation project.
Given the wide array of credits, Platts also reports price indications for each category of projects as they are traded in the broader voluntary market and not just as part of the CORSIA scheme, in an effort to increase transparency.
Putting a price on each of these baskets will help increase visibility in the still-blurry world of carbon finance.
Although the rise of voluntary carbon markets dates back to the early 2000s, following the ratification of the Kyoto protocol, growth was stunted by the 2008 global economic crisis. The new wave of public and private commitments to curb carbon emissions over recent years is now triggering a resurgence of interest in voluntary carbon credits as one way to manage carbon footprints.
While there are no barriers to entry, the lack of transparency in transactions and insufficient understanding of how carbon finance works have kept many potentially interested players at bay.
However, the growing interest in understanding voluntary carbon markets, as well as the efforts of several players to scale and standardize operations, suggest that carbon finance will soon be able to attract new entrants and increase in size.
