Global Renewables & Carbon Marketplace EAC Market Update Global Renewables & Carbon Marketplace Voluntary

Carbon Offset Market Update

U.S. National REC prices rose in Q4, and PJM Tier 1 values remain high

National Green-e REC prices rose in Q4, with 2022 vintage RECs valued at around $2.70/REC. This is a significant jump compared to the low of around $1.40/ REC at the start of the quarter, as shown in Figure 1. A multi-million REC procurement at the end of October drove vintage 2022 REC prices well past the $2 mark and REC prices have remained higher. 2023 vintage is currently trading above $3.20/REC and future vintages are even higher.

PA Tier I compliance RECs in PJM fluctuated between $24 and $27/REC in Q4. For voluntary buyers interested in procuring PJM RECs, the most cost-effective approach is to purchase Ohio RECs. The price of Ohio RECs for 2022 vintage is currently around $5.50/ REC, while the 2023 vintage is hovering around $5.70/REC.

European Guarantees

of Origin

(GO) set record high price in Q4

The price of European GOs maintained their upward trend during the fourth quarter, reaching a record high of nearly €10/MWh, before coming down to around €6.5/MWh towards the end of the year. Imbalance of supply and demand drove the price increases: supply of GOs in the market have increased by less than 1% over the course of the year, while demand was up over 11%, according to data from AIB3, and thus generated fewer GOs than ordinarily expected. The GO prices tracked in Figure 2 reflect 2022 vintage GOs, which saw the highest volume of trading activity in this past year; vintage 2023 GOs ended the year at a similar price point of €6.5/MWh.

Carbon credit retirements see no growth from 2021

Following a market dip in Q1 that coincided with Russia’s invasion in Ukraine, voluntary carbon credit market prices regained momentum through the year. Trove Research reports that volume weighted average prices have increased 40% year-over-year.4 Despite the market seemingly bouncing back from Q1, total retirements in 2022 were flat compared to 2021, breaking the trend of increasing credit retirements year-over-year.

Currently, credit vintage is a key driver of credit price. Vintage 2016 credits are no longer eligible, according to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) as of January 1, 2023, due to CORSIA’s 5-year vintage requirement, and many suppliers are hoping to liquidate their 2016 credits at a low price. Recent vintages, particularly for naturebased solutions and community/livelihood projects, will come at a price premium as corporations seek to achieve their climate commitments.

Credibility and transparency continue to be industry focus

As mentioned on page 7, the United Nations released a report targeting greenwashing, which outlines key recommendations for the use of voluntary carbon credits. The report affirms that offsets cannot be counted towards interim emission reductions required by a net-zero pathway. The report recommends that once interim targets are met, non-state actors on the pathway to net zero use high-integrity carbon credits for the balance of their annual unabated emissions, which are yet to be defined. The report references the highly anticipated Integrity Council for the Voluntary Carbon Market (ICVCM) guidance for defining a highintegrity standard. An update from the ICVCM on its Core Carbon Principles is slated for Q1 2023.

A recent United Nations report has introduced stricter guidance around voluntary carbon credits, but – subject to guidance from the Integrity Council for the Voluntary Carbon Market - there is still much uncertainty around what qualifies as “high-integrity.”

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