2024 Voluntary Carbon Market Performance Overview
Author: Micaela Passetti
In our first newsletter of 2025, we look back and provide a snapshot of the broad voluntary carbon market trajectory in 2024. This newsletter offers a broad review of the key trends that defined the Voluntary Carbon Market over the past year. Through an analysis of monthly retirements, issuances, and overall market performance, we uncover the primary drivers shaping the VCM and provide valuable insights into how these trends lay the basis for the year ahead.
Policy Developments you may have missed in December 2024
Global Monthly Retirements
2024 saw an uneven trend in monthly credit retirements, starting strong in January at 23.4 million and ending the year with 26.4 million retirements in December. Significant dips occurred mid-year, with May marking a notable low at 9.7 million. These trends indicate a seasonal pattern influenced by market events, corporate climate commitments, and policy adjustments. The October and December peaks reflect the rush to complete end-of-year corporate sustainability goals, as retirements showcased an upward recovery in Q4 suggesting renewed buyer interest.
Monthly Retirements vs Number of Distinct Buyers
The data reveals an intriguing relationship between the number of buyers and global monthly retirements in 2024, as fewer buyers often account for larger retirement volumes, as seen in January, October, and December, where significant credits were retired despite lower buyer counts. Conversely, months like March and February, which had the highest buyer counts, saw lower retirement volumes, indicating increased participation from smaller players making less substantial purchases. Seasonal trends also emerge, with May through August reflecting reduced activity in both retirements and buyer numbers. This dynamic highlights the dual nature of the market, driven by bulk purchasers or compliance entities during peak months and smaller, voluntary participants during other periods.
Global Monthly Issuances?
The global issuance of carbon credits in 2024 has shown significant variability, with a total of 326 million credits issued throughout the year. February recorded the highest issuance at nearly 39.5 million credits, while May experienced a notable drop to 16.6 million credits, the lowest of the year. These fluctuations underscore the dynamic nature of the carbon market and highlight the importance The carbon credit market showed a general trend of surplus for most of 2024, with issuances consistently outpacing retirements.
领英推荐
Global Monthly Issuances vs. Global Monthly retirements?
The carbon credit market showed a general trend of surplus for most of 2024, with issuances consistently outpacing retirements. Significant surpluses were observed in February, July, and June, highlighting months where supply greatly exceeded demand. December marked a notable shift, with retirements surpassing issuances, likely reflecting a rush for compliance or voluntary commitments at the year's end.
Global Available Credits vs. Global Monthly retirements
The Global Available Credits represent the cumulative carbon credits issued that have not been retired up to the given month, reflecting the supply of credits available in the market. Over the year, available credits increased steadily from 3.35 billion in January to 3.46 billion in December, despite fluctuations in monthly retirements.
The steady increase in global available credits throughout 2024 highlights an oversupply in the carbon credit market, as issuance rates generally exceeded retirement rates. This trend suggests that the market is not yet constrained by demand, potentially impacting credit prices and market behavior.
Global Market Efficiency
Market efficiency remained below 1% throughout the year, with December showing the highest efficiency at 0.75%. This metric underscores the difficulty in achieving a balance between retirements and the growing pool of available credits.
Global Monthly Retirements vs Global Average Estimated Credit Price
Global average estimated credit prices ranged from $4.86 to $7.58. Notably, the lowest price in July did not correspond with the highest retirements, which occurred in December. This disconnect suggests that factors other than price, such as policy deadlines, corporate targets, project sector or? project location play a significant role in driving retirements. Understanding these dynamics is essential to better align market mechanisms with the factors influencing buyer behavior.
Conclusion
To sum up, the Voluntary Carbon Market's 2024 performance highlights both opportunities and challenges. Seasonal trends, with peaks in retirements during Q1 and Q4, emphasize the role of corporate reporting cycles and end-of-year commitments in driving activity. However, consistent oversupply, with issuances outpacing retirements, underscores the urgency of stimulating demand to balance the market. Market efficiency remained below 1%, indicating a pressing need for interventions to align retirements with the growing pool of available credits. Additionally, weak correlations between distinct number of buyers and retirements highlights the dual nature of the market, driven by bulk purchasers or compliance entities during peak months and smaller, voluntary participants during other periods. Finally, price sensitivity remains uneven, indicating that retirements are influenced by broader strategic and regulatory factors rather than cost alone.
Researcher at BEA International
1 个月What could be the main reason (s) for seasonal trend in Voluntary Carbon Markets (VCMs)? Could there be hidden information on pricing and or application of carbon credits not sending continuous right signals to buyers? Food for thought on VCMs.