This report is produced monthly and provides a high-level overview of the key developments in select compliance and voluntary carbon and biodiversity markets.
In this month's Global Environmental Market Report, we cover key developments in select compliance carbon markets and provide an overview of the month in the voluntary carbon market.
The coverage also includes an update on emerging biodiversity markets.
*Please note: This report 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 compliance carbon markets.
The ACCU market saw a notable increase in trade volumes and prices in August. Generic spot ACCUs opened at A$34.50, fluctuating between A$34.25 and A$34.50 until August 20th, before surging to a peak of A$35.60 on the 28th (its highest price since March) before closing at A$35.25, marking an increase of 2.2% from opening. Human Induced Regeneration (HIR) spot ACCUs mirrored the curve, starting at A$34.50, reaching the same peak of A$35.60 on the 28th, before closing at A$35.40, up 2.6% for the month.
Trade volumes saw a significant increase in August, marking a return to the elevated levels seen earlier in the year, jumping more than 800k from July to 2.07m units. Generic spots represented 32.4% of the total with 670k credits exchanged, while HIR spot ACCUs comprised 29.5% with 610k units, up substantially from July. No Avoided Deforestation (No AD) credits also saw an increase to comprise more than 35% of the market.
Peak trading coincided with the month’s highest prices on the 28th, with 150k Generic and 50k HIR spot ACCUs exchanged. The largest individual transaction also occurred on this day, an 85k Generic No AD parcel at A$35.50. Significant swaps included a 50k Generic/No AD parcel at A$0.30 on the 8th. Forward market activity rose, with almost 450k ACCUs traded and the escalation rate easing to 4.5%. Derivatives saw two trades: a February 2024 A$35.50-A$27.00 Put spread and a July 2025 A$39.00 Call, at A$2.48 and A$2.53 respectively, for 100k units each. ACCU Futures activity was minimal, with a few 5k lot trades for March 2025.
The Clean Energy Regulator (CER) issued 647k ACCUs in the latest issuance period in the back half of August, an increase of 104% on July’s total of 317k, marking a strong return to pre-July levels. 9.6m units have been issued by the Regulator to date, 48% of the yearly target of 20m. Key issuances included 130k ACCUs to Terra Carbon and 86k to a South Australian Landfill Project by Veolia. The Carbon Abatement Contract exits saw 1.05 million credits released in the recent window, slower than expected and prompting the CER to extend the window.
On the 28th, the Office of Minister for Climate Change and Energy released a response to the 2023 Review of the ACCU Scheme. The Government agreed with all 15 recommendations (12 in-principle), aiming to enhance the Scheme’s integrity and effectiveness.
For a comprehensive update on the ACCU market, read our August 2024 ACCU Monthly Market Report
Learn more about our ACCU Market Forecast Report, a method-specific ACCU market supply, demand and price forecast
NZU prices saw notable activity in August, rising from NZ$52.95 at the start of the month to close at NZ$62.50 by month’s end, reflecting a significant uptick driven by policy updates. The upward momentum brought NZUs to their highest traded prices since March.
The month’s trading began with a substantial increase to NZ$54.90 on the 5th, trading sideways to the 12th, and bottoming out on the 15th. Prices moved sharply upwards to reach NZ$60.00 on the 20th, with continued momentum raising prices to the month’s last traded parcel, marking a return to levels seen in the first quarter.
This price rise follows the New Zealand government's decision to cut the number of NZUs available at auction by approximately half, in alignment with recommendations from the Climate Change Commission, aimed at restoring market confidence.
Though market participants remain cautious, trading volumes were high with August recording the second-largest trading month this year.
August also saw the announcement of a 3.2% increase in the Electricity Allocation Factor (EAF) for 2024, adjusted to 0.554 tCO2e per MWh. This change, which influences the allocation of free NZUs to emissions-intensive, trade-exposed industries, reflects recent shifts in thermal generation due to dry weather.
The European carbon market experienced considerable price activity in August, as the benchmark Dec24 contract reflected high levels of activity in nat-gas markets, stock indexes, and national economies.
Opening at €69.55, Dec24 futures declined at first, bottoming out with the monthly low at €67.85 on the 5th. The EUA Dec24 contract’s early slump coincided with bearish sentiment in European gas markets. Compounding the downward pressure on carbon futures, US recession fears caused shocks to reverberate across global markets, including the Japanese stock index which suffered its heaviest losses in nearly four decades.
Markets generally recovered in the days that followed, as nat-gas prices reached year-to-date highs in anticipation looming autumn conditions. Dec24 futures would go on to mirror the bearish sentiment in nat-gas with a sustained rise to €70.08, before a sharp spike and further growth pushed prices to their monthly high of €74.75 on August 20th. EUA prices gradually dropped from there to close at €70.30, €0.75 above opening.
As the month unfolded, with the Dec24 futures contract reaching its highest price since early June, the link between nat-gas and European carbon was reaffirmed as both products slumped in the final week of August. News of Norwegian gas shortages, in confluence with developments in Ukraine and Russia’s gas pipeline would work to break the bullish streak, as bearish sentiment prevailed across European indexes more generally. August closed having all but wiped the gains made to the 20th, in what was a typically volatile month for the Dec24 contract.
Low trade volumes persisted into August, as credits of various types exchanged near the price floor. As in July, liquidity remained low. Retirements remained broadly level with July, as 10.2 million credits were retired across the CAR, ACR, Gold Standard, and Verra registries, some 50% higher than August last year. The Paris Olympic and Paralympic committees’ retirement of approximately 1.5m credits in the wake of the Games were a substantial contribution to total retirements in August.
It is expected that many market participants are waiting on the Science Based Targets initiative’s (STBi) final decision on the role of carbon credits under its Corporate Net Zero Standard which is not expected until 2025.
In the meantime, the International Council for the Voluntary Carbon Market (IC-VCM) is continuing its review of carbon credit methodologies in line with the high-integrity Core Carbon Principles (CCP) quality criteria.
Early in August, the governing body announced that one-third of issuances in the voluntary market, some 230 million active credits, were ineligible for the CCP label because of concerns around the methodologies’ assessments of additionality.
In response, issuing standards worked to revise their credit types to qualify for the tag. Late in the month, Verra announced refinements to its jurisdictional REDD projects across data collection, deforestation risk mapping, and activity data allocation. REDD projects are among the most numerous in voluntary markets, so successful reforms in this area have the potential to affect significant change.
Also with an aim to alight its projects with the CCP label, Verra launched a public consultation as it works to streamline its assessments on project additionality.
COP16 to the Convention on Biological Diversity (CBD) is now less than two months away. An update on the progress of National Biodiversity Strategies and Action Plans is expected from each country next month. Australia is due to host the first Global Nature Positive Summit in a few weeks’ time.
Update on reporting standards and governing bodies
United Kingdom (UK)
US and Canada
Asia Pacific
The NSW Parliament announced the long-awaited bill to amend the Biodiversity Conservation Act 2016. The Biodiversity Conservation Amendment (Biodiversity Offsets Scheme) Bill 2024 provides an updated framework for the offset scheme. This launch was followed by a call for consultation on the methodologies and operational strategies of the market.
The Federal government launched a consultation for its Sustainable Ocean Plan. The plan includes initiatives for decarbonising ocean industries, energy transition, as well as protecting and restoring blue carbon ecosystems. Environmental markets play an important part in this journey as collaboration vehicles between the government and private sector to help scale the financing needed.
Australian Biodiversity Credits Public Pricing Benchmark
In this month’s edition of the NSW Biodiversity Offset Scheme (NSW BOS) credits trade review, our team presents a new VWAP (volume-weighted average price) chart to provide a better, and more accurate overview of how the market is performing.
As we get closer to the e Global Nature Market Summit, let's look into how this biodiversity credit scheme has been performing in contrast to the previous 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
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 to explore how we can help.
Global Environmental Markets Report - August 2024
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