Global Environmental Markets Report - July 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)

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

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European Union Allowances (EUAs)

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Voluntary carbon market (VCM)

Voluntary carbon markets (VCM) saw low trade volumes and pricing continue into July, induced by the northern hemisphere’s quieter summer period. One notable exception occurred in the week to July 30th, where exchange platform CBL reported a weekly volume of 700k.

This marked the highest weekly reported trade volume for the year to date but did not appear to drive higher prices.  

Late in the month, Verra Carbon Standard (VCS) launched ABACUS, a new quality label for forestry methodologies designed to restore confidence and provide important quality assurances to buyers in the voluntary carbon market.

In other news, on July 30th the Science Based Targets Initiative (STBi), a validator of private sector voluntary climate targets, released four technical publications as part of its Corporate Net Zero Standard review.  

The outputs sought to evaluate the effectiveness Environmental Attribute Certificates, including carbon credits in supporting corporate climate action. However, SBTi noted that the findings were mixed with further work required to draw conclusions.

The organisation now invites stakeholders to provide feedback on the ‘Scope 3 discussion paper’ (one of the four publications), prior to the release of the draft Corporate Net Zero standard in Q4 of this year.

Select price movement highlights:

• Nature based carbon offsets [NGOZ2024] remained broadly level across the month, opening at US$1.50 and remaining range-bound, finishing the month at US$1.45.
• CORSIA Eligible Exchange-Based Offsets (CEO) ended July at US$0.32, down US$0.15 from June.
• Clean Cookstove Exchange-Based Offsets (CCO) were down US$0.87 on the 31st, ending July at US$2.43.

Biodiversity markets

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International nature and biodiversity markets highlights:

This month we saw several updates to global standards in response to requests for greater alignment and structure in reporting and claim frameworks.

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Update on reporting standards and governing bodies

• The Global Reporting Initiative (GRI) and the Taskforce on Nature-related Financial Disclosures (TNFD) have released a joint interoperability mapping resource. This tool aligns TNFD's Disclosure Recommendations with GRI Standards, facilitating streamlined biodiversity reporting for organisations. The collaboration aims to harmonise reporting practices, reduce redundancy, and enhance transparency regarding nature-related risks and impacts.
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• The Science Based Targets Network has released a comprehensive Corporate Manual guiding companies in setting and achieving science-based targets for nature. The steps are: Assess, Prioritize, Set targets, Act and Track
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• Earlier this month SBTN also published its Initial Target Validation Pilot Summary Report, based on a program where 17 companies with large supply chains participated.  One of the key findings from this process is that companies demand more structure on target settings, in contrast toa flexible approach.
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• NatureMetrics found that 84% of companies are not ready for EU Corporate Sustainability Reporting Directive (CSRD) and TNFD reporting. The survey, completed across 174 companies, found that 44% currently don’t collect any data on their nature footprint and 84% don’t collect any related data from their suppliers.
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• The WWF has submitted a proposal to the International Court of Justice (ICJ) urging it to include a legal duty for countries to protect and restore biodiversity in its advisory opinion on climate change. The submission argues that biodiversity is crucial for stabilising the climate and must be safeguarded alongside efforts to reduce emissions. It emphasises that ecosystems play a key role in CO2 sequestration and reducing disaster risks. The WWF calls for the Court to establish obligations for states to stop harming nature and adopt the "polluter pays" principle for compensation.
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• The International Advisory Panel on Biodiversity Credits (IAPB) published results to its consultation on biodiversity credit archetypes. Findings show that market actors value high integrity through strong rules and independent third-party oversight. Respondents agree that using biodiversity credits for both contribution and compensation will lead to positive outcomes. They also wanted to see these credits being embedded into corporate strategy and operation, as opposed to a separate “add-on” from business as usual activities. Participants also stressed the importance of acknowledging the rights of Indigenous Peoples and local communities, and demanded meaningful engagement, co-creation processes and equitable outcomes to be present in the development pipeline.
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• The Finance for Biodiversity Foundation (FfB) launched its second edition of the Nature Target Setting Framework for Asset Managers and Asset Owners. One of the key updates includes setting three nature impact target categories: initiation, monitoring and portfolio targets. The foundation also unified  its beginner and advanced tracks into a single approach that is aligned with the GBF.
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European Union (EU)‍

• EU Corporate Sustainability Reporting Directive (CSRD) developments have pushed harmonisation in standards to occur between the GRI and European Sustainability Reporting Standards (ESRS). This alignment will allow 42,500 companies to comply with two reporting standards at once.
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• Natural England published lessons on its Biodiversity Net Gain (BNG) scheme from working with the Local Planning Authorities (LPA). The three key learning outcomes are: to be strategic in delivering benefits for nature and local people and communities, to work with others from different regions and communities, and to know what is a “need to do” and a “nice to do” when making decisions across the planning pipeline.
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• The UK BNG scheme typically ensures that biodiversity credits bought are located as close as possible to the proposed development area. Recently, there is a plan being submitted that wants to purchase the BNG units 200 miles from the development area due to the units’ lack of liquidity. This issue raises the need for more clarity from the current regulation on unit eligibility.
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• The UK Coal Authority launched its nature recovery plan with a consideration to integrate nature-based credits into its financial models. By 2026, it aims to establish a pilot program to test the tools and processes, as well as develop an environmental education and engagement package for people in mining areas.
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• The Irish government confirmed €22.3 million to support research on farmland nature credits projects.

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Americas

• Suriname announced an update to its National Biodiversity Strategy and Action Plan aligning with the Kunming-Montreal Global Biodiversity Framework (GBF). The plan includes increased funding for conservation and restoration, and an opportunity to explore biodiversity offsetting.
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• Brazil's state of Paraná is set to introduce the country’s first subnational biodiversity credit program. The proposed legislation aims to address the environmental impact of businesses by creating a crediting scheme, initially piloted in 25 private reserves. Success in this phase could lead to expansion across other protected areas. The state is evaluating the private sector’s environmental effects to determine the necessary biodiversity credits. This initiative aligns with the Global Biodiversity Framework’s goal to conserve 30% of the planet by 2030. Paraná will present the proposal at COP16 in Colombia and plans to implement it in 2025 after the pilot phase.
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• A US-based asset manager, Principal Asset Management, is launching a new global fund called the Global Sustainable Food and Biodiversity Fund. It aims to mobilise US$554.4 billion of assets under  management into these sustainability targets, . Another strategic reason for this fund creation is to comply with the EU Sustainable Finance Disclosure Regulation. The fund, and others like it, directly help to address the negative impact of global food systems on biodiversity. The UNEP estimates that agriculture threatens 85% of 25,000 species at risk of extinction.
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Australian Nature Repair Market highlights

A recent study funded by the Department of Climate Change, Energy, the Environment and Water found that 30% of the Nature Repair Market pilot project sites are in worse condition than before the projects started. The study found that 55% had maintained their conditions and only 10% had improved.

The pilot ran between April and October 2023. Pilot projects were a mix between ecosystem and species projects in Victoria and Queensland.

These findings require further investigation into the problem and highlights the need for improved standards in the upcoming launch of the market.

The Australian Government has launched a $3 million tender for the Nature Repair Market initiative, seeking experts to develop methods for landholders to protect and restore habitats.

The NSW Government announced significant reforms to the Biodiversity Conservation Act 2016, in response to a critical 2023 review. The reforms include adopting 49 of the 58 recommendations from the ‘Henry Review’, with improvements to the biodiversity offsets system and the introduction of a statewide nature strategy.

The Biodiversity Council welcomed these reforms, but demand more ambitious targets. Key changes include overhauling the offsets system, eliminating discounts for mine-site rehabilitation, and incorporating Aboriginal cultural values. Despite these steps, the review highlights a need for more robust action to prevent ongoing habitat destruction and its impact on threatened species.

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Australian Biodiversity Credits Public Pricing Benchmark

Data used for the following chart was captured as of 31/07 from the NSW Biodiversity Offsets Scheme Credit Transactions Register

• Total volume of biodiversity credits traded fell by 60% compared to the previous month, and 57% compared to the previous year.
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• The volume of credits transferred and retired show to almost be on par.
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• Volume of ecosystem credits traded continued to be greater than species credits throughout the year, and in this month by 70%.
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• In terms of price, the gap seemed to narrow significantly compared to June, with the maximum price traded at A$16,900 and the average is A$2,951.36.

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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 Supervisory Body of the Paris Agreement Crediting Mechanism met in Bonn to advance the operationalisation of the mechanism ahead of Baku. Key progress includes finalising the Sustainable Development Tool, which will require participants to assess environmental and human rights impacts of their projects. These safeguards are essential for ensuring high-integrity carbon markets. The Body also revised the procedure for transitioning Clean Development Mechanism activities to the Article 6.4 mechanism and adopted new activity cycle standards and verification procedures. Further work will continue ahead of their next meeting in the autumn. 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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