The market snapshot is produced monthly and provides a high-level overview of the key developments in select compliance and voluntary carbon markets. The coverage this month also includes an update on emerging biodiversity 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.
The coverage this month also includes an update on emerging biodiversity markets.
*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.
Spot Generic ACCUs opened the month at A$33.75, 25c higher than December’s close of A$33.50. Human-Induced Regeneration (HIR) ACCUs continued to track the Generic price, with the circa A$2.50 premium holding firm. Both units experienced some volatility, before setting at A$35.00 for Generics and A$37.50 for HIRs at month’s end.
A total of 1,425,000 units transacted in the secondary market in January, down from December’s reported volume of 1.916 million units. Trading volumes peaked on the 10th with 350k reported trades.
ACCUs issued in January amounted to 1,125,300 units, an increase from December’s total of 1,072,840 units and brings the number of ACCUs issued under the scheme to over 140.4 million units.
For a comprehensive update on the ACCU market, read our January '24 ACCU Monthly Market Report here.
The NZU price was largely flat to start the year, opening at NZ$69.15 and softening to a low of NZ$67.25 by mid-month. The price remained thereabouts for the next week before finally breaking its range and moving steadily higher over the final week of the month to close at NZ$73.85.
This upward push late in the month sees much of the gains enjoyed in November recovered and may indicate the market ultimately concurs that the fundamentals lean themselves to the upside, following last month’s failed auction.
The European carbon price plummeted in the first half of January by around €13/tCO2, with EUAs expiring in Dec-24 opening at €75.96/tCO2 and moving to €63.15/tCO2 by 17th Jan, largely due to speculative traders re-establishing their bearish position after having unwound a portion of them in the last few weeks of 2023.
Mild winter weather in Western and Central Europe also contributed to the price drop. EUAs continued to track TTF, the benchmark European gas contract, which remained soft. This further incentivised fuel-switching from coal to gas and therefore lowered winter demand for EUAs from the power sector. Additionally, healthy renewable and nuclear power production compounded the situation.
However, the bearish momentum weakened towards the end of the month as the positive German EUA auctions resulted in a stronger EUA outlook, with prices lifting significantly due to the stronger buying interest. News of traders potentially short-covering also added to a slightly bullish tone, as the repeated news of investment funds' increasing net short positioning indicated that a short squeeze situation may be on the horizon. The Dec-24 expiry EUAs eventually closed at €64.16/tCO2.
The international voluntary carbon market had a positive start to the year, despite market participants slowly re-engaging after the holiday period and therefore fewer OTC transactions being heard.
Retirement levels reflected an encouraging opening to the year for the VCM; 6.164 million credits were retired in the second week of January and 6.6 million in the third week, higher than the weekly averages across 2021 to 2023.
Many of the credits being retired are from older vintages and less-favoured projects, therefore it has been speculated that the intention of the retirements is to cleanse portfolios of less-valuable projects that risk not being valid for the incoming ICVCM's Core Carbon Principles (CCPs) stamp.
Meanwhile, in a move that dampened the market atmosphere, the EU parliament voted in favour of banning companies from claiming carbon neutrality when marketing their goods if they rely on offsets.
Nonetheless, the VCM remained robust and steadfast against this month's criticism. For example, cookstove pricing saw little change despite recent research by the University of California, Berkley, which claimed that over-crediting within the methodology could be as high as 9.2 times greater than actual levels. The study was also issued in pre-print last year and its recommendations may already be driving buyer preferences. Cookstove methodologies across the board are also being revised.
Other highlights include:
There’s been notable attention on nature and biodiversity at the start of the year.
Biodiversity and nature markets are a quicky evolving space. The CORE Markets team has released an introductory guide on the topic. Learn more here.
New South Wales BioBanking Credits
The events outlined in this month’s update highlight the evolving nature of global carbon and environmental markets and the complexity of the net zero transition.
To discuss your unique requirements, get in touch with our team today for a no obligation discussion on how we can help.
Global Carbon Markets Snapshot - January 2024
