In Light of Dropping Offset Prices, Innovators Seek to Prop Up the Market and Capture True Cost :
Source: Raising Ambition: State of the Voluntary Carbon Markets 2016, by Forest Trends’ Ecosystem Marketplace (EM).
With 12 MtCO2 e selling for less than $1/tonne in 2015 and over half of those offsets selling for less than $0.6/tonne, some offset suppliers report that current pricing cannot support continued emissions reductions activities – and for some project types, it sends a weak signal for new project development.
Here are some of the reasons why 2015 offset suppliers that have recurring costs may have been willing to offload tonnes for record-low prices:
The disillusioned: An offset supplier relied entirely on carbon finance but couldn’t find enough buyers. Over the years, the supplier loses money to the point where the supplier is willing to sell their remaining volumes at a possible loss to exit the market.
The distressed optimists: An offset supplier sells tonnes below cost so that the temporary influx of finance – though not enough to cover the full costs of mitigation – helps the supplier stay afloat in the immediate future. This “distress selling” allows the supplier to remain in the market, with the hope that demand will grow in the coming years and that prices will rise.
The diversifiers: An offset supplier initially relied solely on carbon finance, but soon found alternative sources that provided a more reliable source of revenue, such as grants or microfinance (for project developers), or added advisory or consulting services (for resellers). For some diversifiers, the varied income streams allow them to ride out bumpy demand in the carbon markets, while others exit the market entirely.
The heavy hitters: An offset supplier finds a buyer willing to purchase a large volume of offsets and is willing to reduce prices in exchange for higher overall value gained.