Global Environmental Markets Report - October 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)

October marked a record month for ACCU trade volumes, reaching 3.49 million units and surpassing September’s high by 697k units. The increase was driven largely by options trading, which rose sharply to 1.37 million units compared to the 500k traded across August and September combined. Generic, No Avoided Deforestation (No AD), and Human Induced Regeneration (HIR) ACCU prices reached their highest levels since April 2023, with the spread between HIR and Generic spots narrowing to just $0.10 by month’s end.

No AD and HIR spots dipped to a monthly low of A$35.90 on October 8th before rebounding to close the month at A$38.50 and A$38.60, respectively, with Generic spots following a similar path. The month’s end saw the strongest prices for ACCUs since April 2023 for these units.

Trades in other ACCU methodologies were limited to one Environmental Plantings parcel at A$49.00 in 10k.

No AD ACCUs saw a 26% increase in traded volume from September, reaching 1.56 million units, while Generic ACCUs added 256k to total 1.40 million. HIR trading volumes were stable at 521k units. October issuance dropped by nearly 60% from September’s high, totalling 1.12 million units, with HIR ACCUs comprising 55% of the total. The CER revised its annual issuance forecast to 19 million units, citing slower-than-expected creation from new projects.

Also in October, Climate Change and Energy Minister Chris Bowen announced the progression of four new ACCU methodologies, including updates to Native Forest Management and Avoided Deforestation methods, along with a new proposal for managing hoofed animals in wetlands.

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For a comprehensive update on the ACCU market, read our October 2024 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)

October saw New Zealand Unit (NZU) prices notch higher, starting the month strong, opening at NZ$62.70 and rallying up to NZ$63.50 by the 3rd.

Prices then traded in a narrow band, between as low as NZ$62.65 and NZ$63.40 by mid-month, before climbing again to close at the NZ$63.70 level. Improving NZ$1.55 from September’s close, this represents a sustained improvement for a third consecutive month and the highest closing level for NZUs since March of this year.

Market participants will now be turning their attention to the final Q4 auction on December 4th. In the event that December’s auction fails to clear, this will then result in the cancellation of the balance of units carried over from the year’s prior auctions.

The decrease of supply that would ensue could be construed as bullish for the NZU market. December’s auction will see some 11.1 million NZUs (not including the Cost Containment Reserve) become available.

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European Union Allowances (EUAs)

EUAs opened strong in October, with the benchmark Dec24 contract opening at €63.61 (daily closing price), before tapering off to the month’s low of €60.29 on the 8th.

Market participants attributed this to reduced compliance buying after the passage of the September 30th deadline.

By mid-month, the Dec24 contract grew to €65.97, ahead of a rise in natural gas prices, driven by challenges to supply due to maintenance disruptions.

Prices then faded to as low as €61.76 on the 21st before rebounding once again, surging over 9% across the following week to a monthly-high of €67.28 on the 29th.  The market then retraced slightly to close the month marginally higher at €64.58.

Voluntary carbon market (VCM)

October saw improved liquidity in the voluntary carbon market. Mid-month, a handful of trades in large volumes sparked signs of improved engagement and further activity.

Buyers utilised a slow market early in the month to secure lower prices, with older vintage Kariba REDD+ credits selling at record lows. As buying increased, 850k V19 Mai Ndombe credits exchanged hands, a D.R.C based REDD+ project, comprising of one 750k parcel at US$0.42, followed by a 100k lot at US$0.41, up from the credit’s previous low of US$0.20. This pickup in activity was seen across several REDD+ projects on the month.

Various carbon indices ticked up, as market participants looked ahead to COP29 for further clarity on Article 6, and news around CCP labels for nature based and cookstove projects.

Late October trading of renewables saw sporadic activity across the month with retirements relatively strong, the CBL GEO Dec ’24 futures climbed higher over October as the benchmark contract nears its expiry. After bottoming-out at US$0.13 in early August, prices rallied in October amidst increased activity. Reaching a high of US$0.46 on the 11th, contracts closed the month at US$0.44. While the nature-based contracts saw Dec25 N-GEO contracts rise to US$0.50.

Biodiversity markets

October 2024 was a milestone month in the developments of global biodiversity market, with 2024 UN Biodiversity Conference (COP16) running from 21/10-1/11.

Over 190 countries were expected to submit National Biodiversity Strategies and Action Plans (NBSAPs) to be reviewed in line with the Global Biodiversity Framework.

Technical discussions were held on topics as the treatment of data on genetic resources, invasive alien species, and the diverse values of biodiversity.

Countries also discussed operational aspects of capacity building and knowledge sharing, management of funds, as well as mainstreaming biodiversity within and across sectors.

For more details on the result of this COP, a separate article will be released from CORE Markets – so stay tuned!

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International nature and biodiversity markets highlights:

BloombergNEF released its Finance Factbook COP16 edition highlighting a significant and increasing gap between current biodiversity finance and future funding needs. The report estimates that US$1.15 trillion will be needed annually by 2030 to restore and maintain biodiversity, about 5 times the size of the current US$208 billion quoted in the Kunming-Montreal Global Biodiversity Framework (KMGBF).

Nature and biodiversity markets are an important source of this finance. And while market activity has increased, only just under US$1 million biodiversity credits have been purchased globally to date..

We are however seeing ongoing progress in support of the markets-based finance method, with key updates outlined below.

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Update on reporting standards and governing bodies

• The International Advisory Panel on Biodiversity Credits (IAPB) launched a framework for high integrity biodiversity credit markets. It includes principles (co-developed with the Biodiversity Credit Alliance (BCA) and the World Economic Forum (WEF)) and guidance for market participants to develop high integrity biodiversity markets.
• World Wide Fund for Nature (WWF) released a position statement on the use of voluntary biodiversity credits. The statement recognises the potential benefits and risks associated with voluntary market schemes and supports activity that does not involve offsetting, applies strict due diligence and occurs in the primary market. The projects must also be of high integrity with adequate governance arrangements in place.
• The World Bank and the Inter-American Development Bank (IDB) have introduced guidelines for Amazonia Bonds, a new financial instrument to fund projects in the Amazon region that benefit local communities, promote biodiversity, and combat deforestation. The guidelines include criteria for project selection, measures to mitigate environmental and social risks, and impact reporting indicators.
• The Science Based Targets Network (SBTN) – a standards body guiding corporates and cities in setting and meeting science-based nature targets - announced the first companies that have publicly adopted its standard. These organisations are GSK, Holcim and Kering.
• Verra launched its first Nature Credit methodology framework under the existing SD Vista standard. Existing pilot projects that meet the requirements will be eligible to submit their documents to Verra starting 1 April 2025 and may start generating the credits once approved.
• Nature Action 100 has released its first benchmark assessment of corporate action on nature at COP16. The assessment finds that over 60% of member companies have committed to protecting nature, with many extending these commitments through their value chains. However, only one company has conducted a comprehensive materiality assessment. Over 40% of the companies have set targets to reduce their nature impact and majority have strategies to achieve these goals. Unfortunately, in terms of recognizing and protecting the rights of Indigenous Peoples and local communities, currently less than 30% meet the benchmark metrics and none of them meets all the criteria.
• The Taskforce on Nature-related Financial Disclosures (TNFD) made several milestone announcements, with the first being an increase in Australian TNFD adopters post the Global Nature Positive summit, bringing the number from less than 10 to 24. This growth is also reflected globally as now over 500 organisations and US$17.7 trillion Assets Under Management are committed to risk management and reporting framework.
  
  Two draft frameworks were also released. The first being draft roadmap to enhance market access to high quality nature data. It follows a partnership announcement with WWF to combine knowledge beyond ‘geospatial ESG’ into TNFD’s Nature Data Public Facility. The second is draft guidance on nature transition planning.

• Over 100 global NGOs and academics have called for the adoption of the Global Biodiversity Standard (TGBS) ahead of COP16. This certification scheme provides independent verification that nature-based solutions are effectively protecting, enhancing, and restoring biodiversity. The standard aims to support KMGBF goals by providing a standardised, science-based approach to monitoring and verifying impacts of restoration projects.

European Union (EU)

• The Finnish Ministry of the Environment has established a framework for voluntary biodiversity markets to encourage companies to take nature-positive actions. Finland is the first country in the EU to establish this market for companies to make voluntary contribution towards nature.
• The Landbanking Group, a German nature tech platform, and African Parks, the largest conservation organisation in Africa, have partnered up to launch the Verifiable Nature Unit.  The VNU is a markets-based funding mechanism based on measurable nature conservation outcomes. The first issue includes 14,000 nature units valued at approximately US$35 million.‍‍

US and Canada

• The CAF Bank, the development bank of Latin America and the Caribbean, and ONE Amazon Impact Fund announced a collaboration to generate digital biodiversity credits for innovative projects that promote socioeconomic development of local Amazon rainforest communities. This initiative converts 30-year voluntary Amazon conservation pledges, covering 750 million hectares of land, into valuable digital assets for international market trading, offering investors precise and high-quality data on protected areas.
• Grupo Boticario Nature Protection Foundation released a report that estimates Brazil’s mangrove carbon stock could be worth US$8.7 billion as tradable credits. This value is calculated using an estimated unit price of US$4.6/t for approximately 1.9 billion tonnes of carbon.
• SeaTrees has launched the world’s first marine biodiversity credits, called “Biodiversity Blocks,” at the COP16 Biodiversity Conference. These credits are generated from its Marereni Kenya project, where each credit will contribute to the planting of one mangrove tree and will be maintained and monitored for 10 years. A total of 300,000 credits are being issued with a price of US$3 each.
• Wildlife Works, in collaboration with Associação Sociocultural Yawanawá and Forest Trends, has developed a new methodology for Biodiversity Stewardship Units (BDSUs). This approach measures biodiversity status based on species richness and aims to fund Indigenous Peoples and Forest Communities who maintain highly intact ecosystems.

Africa

• The Biodiversity Investments Researcher & Accelerator (BIRA Coalition), which includes Xilva, ALU School of Wildlife Conservation, Axum, CreditNature, and ValueNature, has launched Africa’s first Nature Buyers’ Club. This initiative aims to connect financiers with nature-positive projects, generating tangible returns for both ecosystems and investors. The Buyers’ Club will focus on investing in Nature Investment Certificates (NICs) issued by CreditNature.

Asia Pacific

• The Asian Development Bank (ADB) has issued its first biodiversity and nature bond, raising A$150 million (approximately US$100 million) to finance projects across Asia and the Pacific.
• New Zealand based global digital nature credit initiative, the MAHI token, received NZ$1 million funding from Air New Zealand’s Climate and Nature Fund. This investment contributes directly into the currently on-going restoration project in areas impacted by Cyclone Gabrielle and will spur more innovation in developing an Aotearoa biodiversity market.

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Australian Nature Repair Market highlights

• The Global Nature Positive Summit 2024 was held in Sydney at the start of the month and led to several important outcomes. This includes:
  • Emphasizing the importance of Indigenous communities' participation in decision-making processes
  • Highlighting the need to align climate action with biodiversity goals
  • Updates on progress towards KMGBF targets, including the launch of Nature Positive Matters (an initiative to spur private sector involvement),
  • Announcement of  the Global Ghost Gear Initiative, a $1.4 million investment aimed at decreasing the quantity of discarded fishing equipment in the Arafura and Timor Seas, and
  • An expansion of the Heard and McDonald Islands marine reserve by 310,000 sqm, (bringing the total of Australia’s protected marine area to 52%, an outcome more ambitious than the 30x30 global target).

• The Department of Climate Change, Energy, the Environment and Water (DCCEEW) was seeking feedback on the proposed Nature Repair Market (NRM) methodology, specifically focusing on the Replanting Native Forest and Woodland Ecosystems method, and the components and metrics of the Biodiversity Assessment Instrument (BAI).
  
  This first methodology is looking to be ‘stacked’ with the current ACCUs Environmental Planting (EP) methodology – meaning that if current and upcoming EP project developers can proof that their new proposed activity on the same land generates additional biodiversity impact and meets the other NRM project methodology criteria, they can also generate biodiversity credits.
  
  The BAI will be used as a standardised tool to measure and report the outcomes of projects. Each project will be able to issue one biodiversity credit. The idea is to conceptualise biodiversity credits as assets. An analogy presented by DCCEEW’s team during a recent briefing is to think of the purchasing process like buying a house. There are many criteria that go towards the buying decision process and the value of the asset may change over time.

• GreenCollar announced that Accounting for Nature - a non-for-profit research team based in Australia, who’s been developing a standard for measuring and managing natural capital - has taken over as the independent administrator of its NaturePlus biodiversity credit standard.
• Eco-Markets Australia launched a consultation for Cassowary credits, a new independent voluntary biodiversity credit methodology, developed by Terrain NRM.

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Australian Biodiversity Credits Public Pricing Benchmark

The NSW Biodiversity Offset Scheme (BOS) credit trades saw another month with relatively high trade volume compared to last year’s performance, and just slightly under September’s volumes . A total of 8,636 credits were traded in this announcement-packed month. About 60% of credits traded are ecosystem credits and 40% are species credits. The volume weighted average price (VWAP) of the month is A$ $1,478.49 per credit and the maximum price traded is A$34,000.

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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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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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