Global carbon markets are in constant evolution. The market snapshot is produced monthly and provides a high-level overview of the key developments in select compliance and voluntary carbon markets.
In this month's Global Carbon Market Snapshot, we cover key developments in select compliance carbon markets and provide an overview of the month in the voluntary carbon market.
*Please note: This snapshot is designed to provide a high-level overview of the key developments in compliance and voluntary carbon markets. Our in-market team produces daily and detailed updates and trade reports to CORE Markets software subscribers and clients. Contact us to find out more.
This month we cover key developments in the Australian, New Zealand and European carbon markets.
Generic ACCUs (No AD) started the month by opening higher at A$31.75, whilst HIRs opened sideways at A$35.00. Prices rose steadily across the month, with both Generics and HIRs closing the month at their price peaks of A$33.50 and A$36.00 respectively.
In the secondary market, a total of 1,916,000 units transacted over the course of December on the reported market, down from November's volume of 2.16 million units; trading volumes peaked on the 4th December with 295k of reported trades.
In its final round of the year, the Clean Energy Regulator issued 370,500 ACCUs to 24 projects, in comparison to 439,000 units from its previous round. Meanwhile, 7 new projects were registered to begin generating ACCUs.
For a comprehensive update on the ACCU market, read our ACCU Monthly Market Report here.
After the eventful month of November that saw prices lift ~NZ$5.00, December by contrast moved steadily lower following the failed (and year's final) quarterly auction.
The price opened the month at NZ$75.50, falling to NZ$69.00 following the failed auction on the 6th Dec. Of the 23million NZUs available at auction, 13.4 mil had been rolled over from previous failed auctions earlier in the year. As none cleared successfully, the units are to be resultantly cancelled.
In theory, this could be viewed to be bullish for the price as the units are removed from supply, while no demand was satisfied via the auction itself and would therefore remain outstanding. However, counterintuitive to the fundamentals the price remained largely subdued across the month, suggesting any gains had already been factored in. The price hit a low of NZ$68.70 on the 21st Dec, closing the year at NZ$69.15 on the 29th.
The rolling front EUA contract opened the month at €72.49/tonne, with its correlation to Front Month Dutch TTF, the European gas benchmark contract, holding strong, often a symptom of a lack of other market news to motivate price variation in the EUAs. However, bearish fundamentals in the TTF market as well as a combination of a reduction in power emissions, low industrial output and a shift away from carbon-intensive power generation caused the price to plunge to a 14-month low of €66.35/tonne on 15th December.
However, the market took a turn following reports that investment funds had increased their net-short position to a record 42 million in December. The upwards momentum continued in the second half of the month, largely due to a temporary pause on auctions until 15th January thus supporting the price which eventually closed at €78.06/tonne.
The international voluntary carbon market experienced a boost in December as record retirements and a surge in demand contributed to the market closing the year on a positive note.
Total retirements for December amounted to 37.9 million tonnes, over 10 million more than December 2022's figures, with annual demand reaching a historical high of 176.7 million tonnes.
Whilst retirements for Verra projects remained steady, notable increases in retirements were observed for ACR and Climate Action Reserve credits, representing a 65% and 44% rise respectively.
The REDD sector saw a boom in volumes transacted as buyers, seemingly for the purposes of retiring the credits, were able to benefit from the rock-bottom prices that certain REDD projects were asking for, whose integrity has been questioned over the course of 2023.
Nonetheless, rock-bottom prices for those certain REDD projects didn't reflect the market as a whole, as the continued fragmentation meant that more favourably perceived projects held a sturdy price premium, even for older vintages. For example, the VCS 337 Methane Recovery Project in Netherlands v2014 transacted at US$5/tonne mid-month.
Despite the sense that COP28's highly anticipated clarification of Article 6 was underwhelming, the market sentiment appears to be buoyed by participants' willingness to build on infrastructure and instruments in order to create a high-integrity and unified ecosystem. There is also growing collaboration in the market (see more below) to grow an efficient marketplace that will be prepared for Article 6 when it fully comes into play.
Other highlights include:
The events outlined in this month’s update highlight the evolving nature of global carbon markets and the complexity of the net zero transition.
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Global Carbon Markets Snapshot - December 2023
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