Carbon Market – 09.07.2024

European carbon prices traded in an almost-identical range last week at around 70€ as the summer holiday season swung into its peak period, with technical support and resistance levels compressing slightly as the market’s volatility has calmed, while UK Allowances fell away at around £44.50 after a landslide election result ushered in a centre-left government that is expected to speed up action on climate issues.

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Guide for the Optimal Operation of the Voluntary Carbon Market

The Voluntary Carbon Market (VCM) allows companies, organizations, governments, and individuals to buy and sell carbon offset credits voluntarily. A carbon offset represents the reduction of one ton of carbon dioxide or other greenhouse gases achieved through an environmental improvement project, for which it must be demonstrated that emission reductions have been achieved. Emissions are turned into credits that companies can purchase. The projects are varied but mainly involve small community-based activities in developing countries. Reforestation projects, for example, have a strong beneficial socio-economic impact.

The voluntary carbon market aims to provide a mechanism for reducing emissions, channel funding, especially to low- and middle-income countries, and finally, pave the way for the creation of emission trading markets where they do not yet exist. Each project must meet the additionality criterion, meaning the removal or reduction of carbon or greenhouse gas emissions would not have occurred without the offset project.

IETA Guidelines and Challenges of the Voluntary Carbon Market

The International Emission Trading Association (IETA) has recently released new guidelines that analyze the use of carbon credits by industries in the voluntary carbon market and incorporate them into their emission reduction strategies. According to the document, there is a considerable possibility that firms will not meet their short-term environmental targets, risking deviation from the Paris Agreement goals of net zero emissions by 2050. IETA states that the role of the voluntary market is vital in the fight against climate change. It should provide “an efficient mechanism for companies to reduce or eliminate emissions in support of global decarbonization” to channel funding where it is needed, especially in poorer countries.

IETA’s guidelines for using carbon credits can be divided into six categories:

  • Companies must ensure, through their decarbonization policies, that they meet the Paris Treaty targets, both in outlines and interim targets.

  • Companies must quantify emissions according to an internationally recognized standard and publicly report them to access the carbon credit market.

  • Companies must establish and ensure a decarbonization pathway leading to the long-term goal of zero emissions, intermediate targets, and investments in environmental protection and economic growth.

  • Companies must use carbon credits by following a series of steps. They must first start with emission avoidance strategies, that is, implementing technological advancements in production processes. Then, they must move on to the actual reduction of emissions and, finally, the use of carbon markets.

  • Companies must use only officially guaranteed carbon credits issued by a reputable carbon credit program that has received an independent, third-party quality label (such as ICVCM, CORSIA, or ICROA).

We also have such a project in Romania, which receives carbon credits annually from the Swiss organization, Gold Standard, for the emission reductions achieved, approved at the same time by CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). It is about the PET bottle recycling project in Buzau, developed by the company Greentech S.A., part of the Green Group. For more details about the project and how you can buy Greentech project credits, please contact us or click here.

  • And finally, companies must make the use of carbon credits transparent.

The IETA document states that “the voluntary carbon credit market is at a crucial moment.” It must adapt and evolve at a faster pace to maintain investor confidence and contribute significantly to the global goal of zero emissions by 2050. Carbon credit markets are hampered by the lack of a single system of standards and definitions, which now act to increase business confidence in these markets. The IETA document also emphasizes the growing role of removal credits, which are net reductions of CO2 directly from the atmosphere. These credits could also be a valuable mechanism if companies do not meet their interim targets in the transition to net zero.

The IETA guidelines are in line also with the European Green Claims Directive, which has been proposed by the European Commission and currently under discussion at the European Parliament.

Source: IETA, European Comission, Aither Group, Carbon Credits

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