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.
Generic spot ACCUs opened at A$34.00 and closed at A$33.25, while Human Induced Regeneration (HIR) spot ACCUs started at $34.50 and ended at $34.00.
Trading volumes decreased by 13% from April, with 2.191 million ACCUs reported on the secondary market. The HIR-ACCUs premium reestablished at A$0.50 early in the month and briefly converged mid-month due to low liquidity before returning to A$0.50, bolstered by a significant HIR-specific trade.
Market movements were potentially influenced by anticipated changes in various carbon credit methodologies, including updates to the Integrated Farm Land Management, Environmental Plantings, and Savanna Fire Management methods, creating a sense of uncertainty.
Derivative trading grew, accounting for 22.8% of volumes, reflecting market maturation and diversified participation. Notable trades included De24 $30 ACCU Put options and Mar25 $29 ACCU Put options.
Participants monitored potential Carbon Abatement Contract (CAC) exits, expected to impact market volumes. Generic ACCUs made up 73.5% of the market, with 1.611 million units traded, including 840,000 with the NO AD tag. HIR ACCUs comprised 26.5% of the market, with a 12.3% increase in market share despite a 1.5% decrease in volume from April.
Issuance of ACCUs surged by 115.5% from April, with 1,256,253 units issued. The Clean Energy Regulator (CER) projects around 20 million ACCUs for 2024, up from 17.2 million in 2023.
Key issuances included 78,500 ACCUs delivered under government contracts, primarily from GreenCollar's Tripodi Native Forest project, and significant shares to Terra Carbon and Kimbriki Environmental Enterprises projects.
For a comprehensive update on the ACCU market, read our May '24 ACCU Monthly Market Report
Learn more about our ACCU Market Forecast Report, a method-specific ACCU market supply, demand and price forecast
The NZU price was initially stable across the first half of May, opening at NZ$55.50 and trading in a tight range to NZ$54.50. This stability was then unpinned, with prices dropping sharply on the release of the government’s latest ETS consultation which examines options to adjust price settings, in response to the Climate Change Commission’s advice.
The proposed options included scope to lower the auction price floor further, exacerbating market sentiment that the government’s recent involvement is undermining stability.
As a result, the price proceeded to fall and reached NZ$46.00 by the 20th then, following a brief day of support which saw the price touch NZ$49.00 on the 21st, the price hit a low of NZ$44.63 on the 27th May.
The price then enjoyed a rally to end the month, closing atNZ$50.00, 12% higher than its $44.63 low. This is may have been driven by a reaction to the coalition’s latest budget which some market participants thought lacked in the way of new funding for climate initiatives.
The EUA prices climbed for a second month in a row, with the benchmark Dec24 contract opening at €67.82.
The EUA market experienced notable price fluctuations driven by various factors across the month, with a rapid jump to a €72.51 settlement on 2nd May, influenced by speculative traders cutting back their short positions after Commitment of Traders data revealed a reduction in overall pessimistic bets by investment funds.
Following a brief decline to €69.46 on May 15, prices experienced a significant surge, reaching €76.25 on May 21. This four-month high was supported by early profit-taking, bullish gas prices, and the breach of key resistance levels. Factors such as auction supply interruptions and changes in renewable energy generation also played a role in the market dynamics.
The month concluded with prices at €74.10, indicating a strong performance and overall increasing positive sentiment. Additionally, EUAs continued to mirror the trajectory of gas prices, as rising natural gas prices contributed to the upward movement of the European Carbon price.
Prices in the voluntary carbon market were largely stable in May but trading volumes continued to be muted and liquidity thin, with the market's directionality influenced by contending variables.
The temporary suspension of the registry account of the Rimba Raya project by Verra caused concern in the market, having been previously perceived as one of the most high-integrity REDD+ projects on offer. However, an uptick in engagement in Article 6 eligible units served to counterbalance the sense of unease caused by the suspension.
Both issuance and retirement levels in the VCM continue to illustrate its durability and are evidence of developing participation. Retirements reached 5,360,339 in May between the VERRA and GS schemes, the strong figures witnessed at the start of the year gradually diminishing but still up in comparison to volumes from the previous year.
The start of the month saw the IC-VCM approve Verra and Architecture for REDD+ Transactions (ART) carbon crediting programs as meeting its Core Carbon Principles (CCPs), in addition to the already-approved American Carbon Registry (ACR), Gold Standard (GS) and Climate Action Reserve (CAR) programs. However, issuance of the CCP stamps on a methodology-based level has been delayed until June, following complexities around the assessment of certain credits, leaving the market to its prolonged state of anticipation.
Other highlights include:
Global biodiversity markets are taking a bit more shape this month with a surge in initiatives to provide more clarity around these this multi-fungible credits.
Early in the month, Bloomberg released data indicating that an estimated 55% of our global GDP is linked to nature. This means that approximately US$58 trillion is at stake if we don’t accelerate our actions in saving nature.
Towards the end of the month, we saw several developments in efforts to increase investor confidence. These were mostly in the form of improvements in existing market taxonomies and methodologies by standard and governing bodies.
Update on reporting standards and governing bodies
European Union (EU)
United States and China
Australian Biodiversity Credits Public Pricing Benchmark
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 - May 2024
Renewable energy and carbon markets are part of the corporate climate toolkit. They help internalise the cost of the renewable energy transition and the impact of an emissions footprint. Understanding the intricacies and developments between them is an essential part of the process.