How can sustainability leaders prioritise meaningful emissions reductions while mitigating the financial risk of volatile carbon credit prices? In this article we take you through third party carbon price projections from market observers, associated market trends and the key things to consider when developing your carbon credit procurement strategy.
How can sustainability leaders prioritise meaningful emissions reductions while mitigating the financial risk of volatile carbon credit prices?
This is the challenge facing organisations across all sectors – especially those in in high-emitting or hard-to-abate industries.
The process of emissions reduction for many organisations can be long, costly and, in some cases, limited by available technology. It takes significant investment, often over many years to achieve ambitious reduction targets.
Yet, in most circumstances, residual Scope 1 emissions and ongoing Scope 3 exposure can be calculated, or at least estimated, much earlier.
And while emissions reduction efforts must be a priority, it is important to recognise that planning how to manage residual emissions (over time) needs to happen in parallel.
In this article we take you through third party carbon price projections from market observers, associated market trends and the key things to consider when developing your carbon credit procurement strategy.
It is difficult to predict the future demand volumes and prices for high-quality carbon credits with any certainty.
However, most analysts agree that carbon credit prices are likely increase over time. For example:
Much of the variation between the above price projections depends on the evolving standards and regulations that define acceptable carbon credit and project types. But these are not the only considerations.
Here are some other factors that may contribute to upwards price movements:
While many new projects are under planning or development, evolving regulation, increased scrutiny and a growing focus on additional benefits (such as biodiversity) may have an impact on delivery timelines. This, and the other factors listed above, may collectively contribute both to increased demand and tightening supply.
Organisations across all sectors, especially in high-emitting and hard-to-abate industries should actively plan for the risk of rising carbon credits prices, to help mitigate the associated profitability impact.
This process can take place as part of decarbonisation strategy planning, which should include modelling of unavoidable, residual emissions over time.
Understanding the organisation’s emissions position early allows sustainability leaders to explore and model various carbon sourcing options, beyond those available for immediate purchase on the spot market.
In our advisory work, we’re seeing many organisations embracing innovative ways of ensuring access to high-quality carbon credits at the right price.
Some of the options we explore with our customers include:
Even within each of the carbon sourcing models explored above, there is no one-size-fits-all option.
We’ve developed a comprehensive decision making-framework that considers your decarbonisation timeline, your commercial and financial targets and your risk profile, among others.
The resulting carbon sourcing plan includes a contracting method and pricing mechanism that considers your business circumstances and supports your commercial and climate objectives.
The CORE Markets team works with both supply and demand sides of global carbon and renewable energy markets and have structured some of the most complex offtake agreements in the industry.
Put our expertise and our relationships to work for you.
How to avoid the carbon credit crunch: Mitigating financial risk
Designed for decision-makers with carbon market exposure, the ACCU Market Forecast Report serves as a critical tool for investors, project developers, and sustainability leaders. As new data and insights become available, we incorporate them into our forecast model. See what’s new in the Q3 forecast model.
