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 snapshot is designed to provide a high-level overview of the key developments in compliance and voluntary carbon and environmental 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.
In March, the ACCU market saw shifts in spot prices and trading volumes. Generic spot ACCUs opened at A$35.50, dipping from the previous month's close, then fluctuated throughout the month, reaching a peak of A$36.25 before closing at A$33.75, marking a nearly 5% decrease overall.
Similarly, Human-Induced Regeneration (HIR) ACCUs opened at A$36.75, with prices peaking at A$38.00 before dropping to a low of A$32.00, eventually settling at A$34.00. The reported market witnessed the exchange of 2,499,000 ACCUs in March, indicating a 16.83% uptick from February's reported volume of 2.139 million units.
The Clean Energy Regulator (CER) issued around 1.85 million ACCUs, up by 600,000 from February. This brings the total issued under CER to over 143.5 million. ACCU holdings grew by 2.7 million in Q4 2023 to 36.2 million. CER aims for an issuance of 20 million ACCUs in 2024, up from 17.2 million in 2023.
For a comprehensive update on the ACCU market, read our March '24 ACCU Monthly Market Report here.
The NZU price plummeted in March, with the spot opening at NZ$66.25 and closing at NZ$58.35. The first New Zealand ETS auction of the year was the leading cause of the price drop. The auction saw a partial clearance, with 2.974 million out of the total 3.525 million NZUs on offer being sold at NZ$64 each, a significant step down in comparison to the previous day's closing price of NZ$65.40.
Although the results represented the first time that the government-run auctions have cleared since December 2022, the outcome was still underwhelming. The NZU price went on to trade at NZ$58.00 within minutes of the auction closing and plummeted further to NZ$55.00 by the afternoon as the sense of weak demand took hold in the market. With 88 bids from 16 participants, the auction's cover ratio stood at 0.84, excluding the Cost Containment Reserve. The estimated 550,000 unsold units will be rolled over into Q2's auction in June.
The heightened trading engagement surrounding the NZU auction contributed to record volumes transacting in the market, with just under 3.850 million credits trading in March.
The benchmark Dec24 EUA futures rose in March, moving from €56.37 to a settle of €61.80, with the average price up over 3% in comparison to February.
The opening days of the month started with a climb to €60.54 as the market witnessed short covering and falling renewables output in Europe. However, towards the end of the second week, a weak auction and more robust renewable output saw the EUA price decline again, with the dip being furthered by data suggesting that investment funds had reduced their net short position by a smaller amount than expected on the major exchanges.
Nonetheless, the back half of the month saw the EUA recover with European gas prices contributing significantly to the EUA surge. The correlation between the prices reached one-to-one on some days and the gas levels were bullishly affected by energy infrastructure attacks in Russia and Ukraine, as well as unplanned outages in Norway and low LNG production in the US.
The Voluntary Carbon Market wrapped up a busy quarter with March retirements hitting 13.4 million tonnes. The month’s figure is down from January and February's volumes but contributed to almost 53 million tonnes being retired across Q1, representing the second highest retirement figure in history.
Despite strong retirement figures, the credit surplus continued to rise in March, amounting to almost 1 billion credits being available from the four largest standard bodies, Verra, GS, ACR and CAR, with March's issuance reaching 24 million.
Buying trends within the VCM suggest that participants are attempting to predict which projects will gain the ICVCM's CCP tags, leading to the 'high quality' credit availability beginning to dwindle whilst 'low quality' credits claim a large portion of the supply glut.
Meanwhile, ICAO (International Civil Aviation Organization), the operators of the CORSIA international offsetting scheme for aviation, announced that they will not approve any further voluntary standards, including GS, Verra and CAR, until the programs make amendments to their applications.
This means that ACR and ART TREES remain the only two standards whose credits have gained approval. Both Verra and GS's applications were given 'provisional' approval and now must wait until November at the soonest before potentially gaining approval. This is partly due to new conditions imposed by ICOA where standards must guarantee that credits used for CORSIA purposes will not be used by the host country to fulfill their own Paris Agreement emissions targets.
This led to ICE's Dec-24 CORSIA Phase 1-eligible credits prices soaring at the end of the month to a peak of US$20.05/t as a reflection of concern over a near-term supply shortage, as only an estimated 7 million credits are so far eligible for Phase 1. Nonetheless, despite the rally, the significant time period before Dec-24 delivery fed into a market sentiment that the standards have ample time to make the necessary adjustments to gain approval. The month closed with Dec-25, Dec-26 and Dec-27 settling at US$15.05, US$14.55 and US$14.30 respectively, thus continuing their backwardation.
Other highlights include:
This month we continue to see emerging biodiversity standards, groups and project development activities happening across the globe. Funds are flowing rapidly into this space signalled by the launch of eight new project funds from the European region, raising the global value of assets with biodiversity in their project titles from US$0.52billion to US$1.5billion.
Reporting standards update
Europe
APAC
US
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.
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Global Environmental Markets Report - March 2024
