Global Environmental Markets Report - April 2024

Compliance carbon markets

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

‍

Australian Carbon Credit Units (ACCUs)

The ACCU market exhibited continued price volatility in April and trading volumes grew further; 2.519 million units transacted in the reported market in comparison to the previous month's figure of 2.499 million.

Despite the market experiencing further erratic price movements in April, the spot Generic ACCUs closed almost sideways to their opening level, starting the month at A$33.90 and moving to a slightly softer close of A$33.75. Similarly, the spot Human Induced Regeneration (HIR) ACCUs first printed at A$33.75 and ended at A$34.00.

However, the sentiment throughout the month was more bearish, with A$31.50, the lowest traded level in April, being this year’s price trough and the cheapest price dealt since 30th November 2023 for spot Generic ACCUs in the reported market.

ACCU issuance has declined significantly in comparison to March, with just over 583,000 ACCUs issued in April. This represents a 68.5% decrease from March’s total of 1.85 million ACCUs issued.

The fixed delivery exit arrangement’s fourth pilot window was opened on 26th April, with the window for eligible deliveries being from 1st July 2023 to 31st December 2024 as opposed to the previous 6-month timeframe. Additionally, a minimum delivery figure was set for sellers at 20% of the applicable delivery milestone.

‍

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

‍

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

‍

‍

New Zealand Units (NZUs)

The NZU prices fell further in April, moving from March’s close of NZ$58.35 and dropping by almost 5% on the 8th following the publication of draft recommendations by the Climate Change Commission (CCC), which indicated the need for the government to bolster its 2050 target. Weak demand continued to put a dampener on prices within the market and the lack of clear policy guidance to tackle fundamental market structural challenges, notably the surplus of forestry NZUs in circulation, along with broader climate policy concerns, compounded the bearish sentiment. Spot NZUs eventually closed at NZ$55.25.

‍

‍

European Union Allowances (EUAs)

The EUAs saw prices lift in April, with the benchmark contract Dec-24 opening at €61.80 and closing at €68.52. The lowest level of the month of €57.41 was reached on 3rd April following a weak auction as traders awaited 2023 EU ETS emissions data.

The market anticipated a significant decline in emissions last year, which was confirmed by the data which reported a -15.5% drop in emissions in 2023 (in comparison to the -14% forecast). However, the continued strong correlation between the EUA and natural gas prices took hold of the market and overshadowed any potentially bearish reactions to the greater than expected emissions drop. A climb in European gas prices served to bolster the EUA levels, reaching their peak settlement on 16th April of €73.62 and representing a 25% rally within two weeks.

Fundamental factors such as tensions in the Middle East and gas supply disturbances in the North Sea as well as the US Gulf contributed to the price gains and although the easing of tensions in the Middle East then led the Dec-24 EUAs to soften in the second half of the month, another price surge to $68.39 was witnessed following rumours that the EU could consider a ban on transshipment of LNG from Russia.

Voluntary carbon market (VCM)

‍

A heightened sense of optimism was felt this month in the Voluntary Carbon Market, with April retirements surpassing 14.7 million tonnes and further communication from the Science Based Targets initiative (SBTi) regarding the potential use of carbon credits for Scope 3 emissions abatement purposes.

Although sentiment appeared to be buoyed, this was not reflected in price growth; levels have remained stable across the month and trading volumes steady. However, stratification continues in the market, with a range of variables including location, vintage, standard and technology feeding into the spectrum of prices.

The ICE CORSIA Phase 1 Dec-24 futures exhibited increased volatility again this month, opening at US$20.05/tonne and settling at new heights of US$23.00/tonne on 12th April before winding back down to a closing settle of US$15.50/tonne. As there are only an estimated 7 million credits available to the market with Phase 1 eligibility at present, fear of a short-term supply shortage these credits has contributed to the price fluctuations. This was, compounded by anticipated demand increases for correspondingly adjusted credits (CA) (which CORSIA Phase 1 requires) from buyers with Singapore carbon tax obligations.

‍

Other highlights include:

• The REDD+ sector received another blow this month after the historically well-regarded Rimba Raya project's operating license was revoked by the Indonesian government, alleging that the project took part in deals that surpassed its licensed area. Rimba Raya has been perceived as one of the most premium REDD projects and is one of the largest nature-based projects in the VCM, but demand for the credits quickly vanished following the announcement  as market participants await clarification over the situation.
  
  Prior to the announcement, the project had traded at US$7.65 for v2018 at the start of the month. Other notable trades included VCS 934 Mai Ndombe REDD+ Project from the Democratic Republic of Congo- vintage 2016 credits traded at US$0.35 in 77,000t and vintage 2019 traded at US$1.35 in 50,000t.

• The ARR market saw multiple Chinese project developers withdraw from the VCS program this month and move to the domestic VCM in China.
  
  Four projects, including the relatively liquid VCS 2379 Huadu Afforestation Project, were withdrawn and another project relinquished its application to the VCS. At the start of the month, VCS 1855 Hechu Afforestation Project in Anhui Province v2021 traded at US$4.85 in 20,000t.

• The renewables sector continues to fetch healthy interest, with the credits appealing to buyers seeking out cheaper credits in sizeable transaction volumes. VCS 1753 Indian Solar v2020 credits traded at US$0.75 in 10,000t in the second week of April and VCS 2052 Indian Wind v2020 credits traded at US$1.10 in the third week of the month. A 55,000t trade at US$0.55 was heard towards the end of the month for VCS 1143 China Solar v2018-2019 credits.

Biodiversity markets

‍

Recent activities in biodiversity and nature markets indicates a strong trend towards a more structured and standardized approach.

Organisations such as Nature Action 100 and the International Sustainability Standards Board are spearheading initiatives to incorporate comprehensive biodiversity considerations into corporate investments and reporting standards.

Additionally, new consultation processes by the International Advisory Panel Biodiversity Credits (IAPB) suggest a push for more robust methodologies in biodiversity credit systems.

Notably, national frameworks in Australia and Japan are expanding conservation efforts beyond traditional areas to include Other Effective Area-based Conservation Measures (OECMs), enhancing nature-positive contributions in corporate reporting.

‍

International nature and biodiversity markets highlights:

‍

Reporting standards update

• Nature Action 100 (NA100) released a benchmark indicator tool for companies to make investments in biodiversity projects. In summary, to get investment, project must meet the listed sub-criteria on: ambition, assessment, targets, implementation, governance and engagement. Learn more
  ‍
• The International Sustainability Standards Board (ISSB) commenced its research project to potentially include biodiversity and nature reporting into their standard, in alignment with the Task Force for Nature-related Financial Disclosure (TNFD). Learn more
  ‍
• The International Union for Conservation of Nature (IUCN) released guidelines for monitoring biodiversity in protected areas and OECMs. Learn more
  ‍
• The IAPB launched another round of consultation to shape the standard framework of biodiversity credits. This time it is asking about the archetypes of biodiversity projects, meaning the categorisation of biodiversity project methodologies. Learn more

Europe‍

• A new business-led biodiversity initiative called the Biodiversity Alliance for Sustainable Management was launched in Brussels by CSR Europe and the Wildlife Habitat Council. Its major focus is on implementing EU requirements on biodiversity as part of the Corporate Sustainability Directive (CSRD) and on aligning with TNFD. Learn more
  ‍
• French data company, CDC Biodiversite, recently launched an opensource corporate biodiversity footprint assessment tool to evaluate corporate impact and dependencies with nature. This tool is made in alignment with the TNFD standard.

Asia Pacific (APAC)

• Australian researchers published a paper on the pricing of methodologies across several current crediting standards for biodiversity credits. Among other findings, the research highlights the significant price gap between various projects - between $7 to $41,000 USD per 100 years of a crediting project’s lifetime. Moving forward, researchers expect an increase in overall market liquidity. This will be driven by growing corporate demand, with supply rising to meet this demand as more investors realise the potential within this market.
  ‍
• The Department of Climate Change, Energy, Environment and Water held a consultation to recognise OECM as part of Australia’s strategy to achieve the 30 by 30 goal (to protect at least 30% of land, freshwater and ocean ecosystems by 2030). OECM refers to regions or projects that are currently not recognised as an effective conservation area. Japan has been a pioneer in recognising this methodology and they have been incorporating it into their biodiversity market. Australia’s drafted framework also includes considerations to integrate the activities under this method with the Nature Repair Market. We hope to see the final framework being released soon.

‍

Australian Nature Repair Market highlights

Data referenced below and used for the chart was captured as of 30/04 from the NSW Biodiversity Offsets Scheme Credit Transactions Register

• Volume of trades in the month of April have almost reach the same number as totals from the last quarter, indicating growth in the market.
  ‍
• Just over 15,000 credits were transacted, with an average price of $4,862.19 and maximum traded price of $34,000.
  ‍
• 90% of trades were ecosystem credits, leaving just 10% being traded on species credits. This trend is consistent with previous months where ecosystem credits seem to be more in demand compared with the latter.
  ‍
• 68% of these credits were retired for the purpose of complying with a requirement for either a planning approval or a vegetation clearing approval.

‍

‍

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

Other environmental market developments

‍

• Early in April, the Integrity Council for the Voluntary Carbon Market (IC-VCM) announced the first approvals for carbon-crediting programs meeting its Core Carbon Principles (CCPs). The programs were American Carbon Registry (ACR), Gold Standard (GS) and Climate Action Reserve (CAR).
  
  In a later round of announcements, in early May, IC-VCM also approved Verra and Architecture for REDD+ Transactions (ART) carbon crediting programs.
  
  Together these five programs have a 98% share of the Voluntary Carbon Market.
  ‍

• On the 9th of April, the Science-Based Targets initiative (SBTi) made a statement indicating that carbon credits could be used for abatement of Scope 3 emissions beyond its corporate standard’s current limits.
  
  The news was welcomed by carbon market participants but criticised by some non-government organisations. Members of SBTi’s own staff also called the announcement “premature” as the organisation’s Technical Committee is still making a final decision on the issue.  
  
  SBTi has since clarified that no change has been made to its standard. The review process continues and a draft proposal with additional guidance on managing Scope 3 emissions is expected to be released in July of this year.

‍

‍

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.

‍