Global Environmental Markets Report - June 2024

Compliance carbon markets

This month we cover key developments in the Australian, New Zealand and European compliance carbon markets.

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Australian Carbon Credit Units (ACCUs)

In June, the ACCU market experienced relatively stable prices with marginal movements. Generic spot ACCUs opened at A$33.00, dropped to a low of A$32.75 on June 11, and peaked at A $34.60 on June 18, before closing at A$34.25, a 3.8% increase from the start of the month.

Human Induced Regeneration (HIR) spot ACCUs started at A$33.85, rose to A$34.95 on June 18, and ended the month at A$34.50, reducing the Generic/HIR premium to A$0.25 in June, from A$0.75 in May.

Trading volumes in June were slightly down by 2.15% from May, with 2.144 million units traded.

Generic ACCUs dominated the market, comprising 79.5% (1.704 million units), with 67.7% of these having the NO AD tag. HIR ACCUs accounted for 15.8% (338k units), a 42% decrease from May. Peak trading volumes occurred on June 18, with 626k ACCUs traded.

Significant ACCU trades included a Savanna Fire Management spot trade at A$34.50 and a Savanna Fire Management with Indigenous co-benefits trade at A$50.00.

ACCU derivatives also saw active trading, with notable trades such as a Feb25 A$29 ACCU Put option and a Dec24 A$37 ACCU Call option.

ACCU issuance increased by 22.3% from May, with 1,537,091 units issued. The Clean Energy Regulator (CER) projects around 20 million ACCUs to be issued in 2024, up from 17.2 million in 2023.

Significant issuances included 257,000 ACCUs to LMS Energy’s Landfill Gas projects and 81,415 units to Emissions Abatement Solution’s Gindalbie HIR project. Other notable issuances were to Weemabah’s Moombidary HIR project and various projects by Corporate Carbon and AgriProve Solutions.

Interest in derivatives continued, indicating market maturity and long-term engagement by larger entities and financial institutions. Discussions on Carbon Abatement Contract (CAC) exits remained a focus, with participants closely monitoring the market impact of increased volumes from exited CACs.

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For a comprehensive update on the ACCU market, read our June '24 ACCU Monthly Market Report

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Learn more about our ACCU Market Forecast Report, a method-specific ACCU market supply, demand and price forecast

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New Zealand Units (NZUs)

It was initially a hot start to the month for NZUs, opening at NZ$50.00 on the 3rd June on the back of some momentum seen towards the end of the previous month, following the coalition's lack-lustre allocation to climate initiatives in May’s budget.

However, the momentum quickly waned, with the price topping out only two days later at NZ$56.00 on the 5th June, before proceeding to bleed-off once again, hitting a low of NZ$48.00 by 19th.

June also saw the second ETS auction of the year come and go, this time falling to clear. This was no surprise, given the floor price of NZ$64.00 which had the auction’s NZUs on offer ~NZ$15.00 above the secondary market price.

While this outcome was expected, it does little for market confidence short term. However, if the remaining auctions in September and December also fail, the units that had been offered through the auctions across the year would be cancelled and thus removed from the available supply.

The price managed to regain some ground over the last week of the month, to close at NZ$50.50 – virtually flat on the month, and approximately in the middle of the prior two months trading range, indicative of a market lacking direction and confidence.

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European Union Allowances (EUAs)

The EUA prices experienced a volatile month in June 2024, with the benchmark Dec24 contract influenced by various market dynamics. The month began with a decline, as the Dec24 contract opened at €73.89 on 3rd June, dropping 2% from the previous month due to bearish natural gas prices.

Mid-month, the market saw significant fluctuations. On 5th June, prices fell sharply by 3% to €72.33, reflecting continued bearish sentiment in the natural gas market moving through the summer period. However, a temporary recovery occurred on 7th June, with prices inching up by 0.4% to €72.10 amidst a cautious energy market.

The second half of the month was marked by heightened volatility around the options expiry. On 17th June, prices plummeted over 3% to a six-week low of €68.28 as option traders unwound their hedges. This trend continued with prices hitting €68 on 18th June. Following the expiration of the June options contract, there was a significant rise on 20th June, with prices climbing by 3% to €70.33 driven by profit-taking activities.

The latter part of June saw a consistent downward trend. On 21st June, prices fell by 1.6% to €69.22 due to a bearish natural gas market and increased selling pressure. The decline continued, and by 27th June, prices had dropped by 1.5% to below €67 as investment funds reduced their holdings.

The month concluded with the Dec24 contract settling at €66.67 on 28th June, marking a decrease from the month's opening and reflecting the overall bearish sentiment influenced by natural gas prices and market trading activities.

Voluntary carbon market (VCM)

In June, prices in the voluntary carbon market remained stable, as trading volumes in the secondary market were low and liquidity was thin. However, despite the lack of volatility in the market, there have been some moments of significance.

The beginning of June saw an announcement from The Integrity Council for the Voluntary Carbon Market (IC-VCM), having approved seven carbon crediting methodologies, that are now eligible to use the high integrity ‘Core Carbon Principles’ (CCP) label. The CCP label can now be used on approximately 27 million credits issued by projects that reduce GHGs by capturing methane and destroying ozone-depleting substances from discarded equipment. This label provides a quality stamp for the offsets and intend to restore confidence in the VCM.

To comply with the UN aviation agency ICAO’s Corsia decarbonation scheme, airlines are set to spend US$600m on offset credits in 2024, an estimate made based on expectations that demand for Corsia-eligible emissions units (EEUs) would be between 9 and 31 million units in 2024. Airlines and airports are expected to be the primary buyers of EEUs, to comply with the Corsia target of reducing their emissions by 85% of 2019 levels over the 2024-2026 period. The majority of EEUs available, with only a handful of carbon standards and registries being fully accredited by ICAO to supply credits, are from Guyana’s REDD scheme.

Further, a large REDD voluntary carbon project in Mozambique has been planned, that will span approximately 4 million hectares. It is expected that this project will benefit over 318,000 local community members through income generation and direct revenues from carbon.

Verra has suspended 27 of CQC’s implicated cookstove projects as a precautionary measure, as CQC claimed in late June that its founder was guilty of wrongdoing that allegedly resulted in the over-issuance of millions of cookstove credits.

VCS Clean cookstoves have been lower in June, as sellers search for buyers, the market has softened over the month with V20 African cookstoves offered at US$3.50 at the end of June.

Both issuance and retirement levels in the Voluntary Carbon Market (VCM) demonstrate its resilience and highlight growing participation. In June, retirements totalled an estimated 4,027,949 across the VERRA and GS schemes. Although the strong figures seen at the beginning of the year have gradually declined, they remain higher compared to the previous year's volumes.

Iin other news, Microsoft has committed to purchasing 500,000 carbon dioxide removal (CDR) credits from Occidental Petroleum's direct air capture (DAC) division, 1PointFive, over the next six years. This marks the largest single acquisition of CDR credits facilitated by DAC to date and highlights the growing adoption of climate technologies as a means for organisations to reach net-zero emissions.

Biodiversity markets

We are around three months away from the sixteenth meeting of the Conference of the Parties to the Convention of Biological Diversity (COP16). A 9-day meeting in Nairobi towards the end of May agreed on a set of consolidated targets for the UN summit to be held in October.  

COP16 objectives include the need to increase finance, high-tech biology, Indigenous people’s engagement and greater world cooperation to reach our global nature positive goal. Nature and biodiversity market proponents view this as a positive step to improve areas which have not met initial high integrity parameters.

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International nature and biodiversity markets highlights:

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Update on reporting standards and governing bodies

• The International Carbon Registry announced the development of its Pilot Biodiversity Program with projects that contribute to enhancing biodiversity featuring on its platform.
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• The Taskforce on Nature-related Financial Disclosures (TNFD) has announced that over 400 organizations have now adopted its corporate reporting recommendations. The public listed members have a combined market capital of over US$6 trillion, double the size calculated in January.
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• Spring, a new nature investment initiative by the Principles for Responsible Investment (PRI), was launched this month and garnered significant support from over 200 investors who collectively manage assets worth US$15 trillion.
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• The European Bank for Reconstruction and Development (EBRD) is urged to improve its biodiversity safeguards and eliminate the practice of biodiversity offsetting. Despite recent policy revisions, campaign group CEE Bankwatch criticized the EBRD's environmental policy for not adequately preventing nature-damaging projects. Key recommendations include designating no-go areas for financing, focusing on ecosystem integrity, and replacing the 'no net loss' principle with 'no loss of biodiversity'.

European Union (EU)‍

• The European Council has approved negotiations with the European Parliament on the Green Claims Directive. This initiative aims to standardise the way companies present their environmental credentials, ensuring transparency and preventing misleading claims. The directive will establish clear guidelines for substantiating green claims, promoting consumer trust, and encouraging genuinely sustainable business practices. This effort aligns with the EU's broader objectives of achieving climate neutrality by 2050 and fostering a more sustainable market.
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• TNFD and EFRAG have published a correspondence mapping to help companies align TNFD recommended disclosures with the European Sustainability Reporting Standards (ESRS).
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• UK-based conservation charity, the Botanical Gardens Conservation International (BCGI) collaborated with Plan Vivo, Society for Ecological Restoration and others to develop The Global Biodiversity Standard (TGBS) for tree planting programmes.
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• A study by Cambridge University found that UK’s Biodiversity Net Gain (BNG) metric does not lead to improvements for birds and butterflies, even though it captures plant diversity well. The study highlights that additional conservation efforts are needed to achieve meaningful gains for these species. It also points out that the current metric might not reflect the full ecological value of habitats. Researchers recommend more ambitious biodiversity goals
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• Research done by the ODI showed that only Norway and Sweden have paid their fair share of biodiversity finance, while 23 out of 28 analysed developed countries are currently contributing less than half of their pledged amounts. Significant increases in contributions are necessary for the world to meet the US$20 billion biodiversity investment target by 2025.

• Orsted - world's largest wind farm - set up a framework to help renewable companies measure action towards becoming net positive for biodiversity.

Americas

• The world-first biodiversity bond, for US$50 million was announced by BBVA Colombia and the International Finance Corporation (IFC). The funds will be used to finance biodiversity projects, including reforestation, the regeneration of forests and degraded land, mangrove conservation or restoration, climate-smart agriculture and wildlife habitat restoration. BBVA Colombia is the issuing bank, with IFC acting as the structurer and investor.
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• An Indigenous-led organization based in Canada, Coast Funds, released guidelines emphasizing the exploration of various conservation finance tools, including biodiversity credits. This reflects a growing openness among Indigenous communities to consider biodiversity credits as a viable funding mechanism for their conservation efforts.
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• Canada released its 2030 Nature Strategy and Nature Accountability Bill. This strategy is made to align with the Kunming-Montreal Global Biodiversity Framework.

Asia Pacific

• Financial institutions in Singapore, City Developments Limited (CDL) and DBS Bank, has have entered into a first of its kind S$400 million sustainability-linked loan that is aligned with TNFD recommendations.

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Australian Nature Repair Market highlights

The Australian Government has agreed to set the national 30 by 30 target and to include Other Effective area based Conservation Measured (OECM). A new consultation is currently running to review the draft national roadmap to achieve this target.

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Australian Biodiversity Credits Public Pricing Benchmark

• Total volume of biodiversity credits traded increased in May by 10% compared to April.
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• In contrast to May, almost 90% of the credits were retired. This is potentially due to the need to close off the financial year.
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• The volume between ecosystem credits and species credit issuances are almost equal.
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• In terms of price, a wider gap between the average and maximum price continues to grow. The most expensive credit traded this month is Cumberland Plain Woodland in the Sydney Basin Bioregion forA$40,000 per credit.

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Biodiversity and nature markets are a quicky evolving space. The CORE Markets team has released an introductory guide on the topic. Learn more here

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Other environmental market developments

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• The Integrity Council for the Voluntary Carbon Market (IC-VCM) approved the first carbon-crediting methodologies to meet its high-integrity Core Carbon Principles. These seven methodologies cover 27 million carbon credits from projects focused on capturing methane from landfill and by destroying ozone-depleting foams and refrigerant gases from discarded equipment.
  
  Annette Nazareth, Integrity Council Chair, said: “This is just the beginning. We will be announcing further categories eligible for CCP-labels that meet our criteria as we continue our careful and thorough evaluation of the submitted crediting methodologies and properly consider complex issues with our expert stakeholders.” - Learn more
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• During the Bonn Climate Change Conference held in June, delegates worked through a series of issues where progress was needed ahead of the November UN Climate Change Conference (COP29) in Baku.
  
  The level of progress achieved was summarised as “modest” with “a steep mountain to climb to achieve ambitious outcomes in Baku”, in the UN Climate Change Executive Secretary’s closing speech.
  
  The issues covered included key technical aspects of Article 6. Discussions clarified positions on Article 6.2 and 6.4 with delegates agreeing to hold a workshop to further progress this work before COP29 in the hope to finalise an outcome at the Baku summit. - Learn more

• The Voluntary Carbon Markets Integrity Initiative (VCMI) has partnered with the Climate Vulnerable Forum and its V20 Finance Ministers (CVF-V20) to leverage carbon markets in support of V20 Climate Prosperity Plans.
  
  This collaboration seeks to identify capacity gaps preventing CVF-20 countries from accessing high-integrity carbon markets and develop appropriate carbon finance strategies.
  
  In doing so, the initiative is expected to direct carbon finance where it is most needed and accelerate implementation of the Paris Agreement and the realization of Sustainable Development Goals (SDGs). - Learn more

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Do you need help navigating the evolving market conditions?

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.

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