My 2024 Predictions for the Voluntary Carbon Markets

As the world continues to grapple with the implications of climate change, the voluntary carbon market (VCM) has emerged as a crucial tool in global efforts to reduce carbon emissions. These markets allow businesses and individuals to purchase carbon credits, offsetting their emissions by funding projects that reduce or remove greenhouse gases from the atmosphere. The significance of VCM is growing, especially as more entities strive to meet their sustainability goals and as public awareness around carbon neutrality increases.

Looking ahead to 2024, the voluntary carbon market is poised for transformative changes. These changes are driven by a blend of technological innovation, evolving regulatory landscapes, and increasing participation from various sectors. Understanding these upcoming trends is essential for stakeholders involved in environmental management, policy-making, and corporate sustainability. The following predictions, based on recent studies and expert opinions, offer insights into the trajectory of the voluntary carbon market in 2024.

Prediction 1: Growth in Market Volume

1) Substantial Increase in Market Size

The voluntary carbon market is anticipated to experience significant growth in terms of overall volume in 2024. According to a report by Ecosystem Marketplace , one of my favourite and most reliable resources, the market saw a huge surge in recent years, a trend expected to continue. This growth is attributed to heightened awareness of climate change and the increasing demand from corporations to meet their carbon neutrality goals. Ecosystem Marketplace predicts that the market could see a doubling in the volume of carbon credits traded compared to previous years.

2) Enhanced Participation from Various Sectors

The growth isn't just in volume but also in the diversity of participants. Industries previously indifferent to carbon offsetting, such as technology and healthcare, are now showing keen interest. This broadening of the market base signifies a shift in corporate responsibility norms and consumer expectations. Reports from the Carbon Offset Guide show this trend, highlighting an uptick in engagement from sectors not traditionally involved in VCM. The more the merrier and we hope this continues as businesses adopt the 'compensate now' for footprint emissions, not stall to 205!

3) Impact on Pricing

With the increase in volume and participation, a consequential impact on carbon credit pricing is anticipated. Analysts from the Carbon Trust suggest that prices might see a moderate increase, reflecting the growing demand and the introduction of higher-quality offset projects. This price adjustment could lead to more impactful projects receiving the necessary funding, further driving the market's growth. VCU's are simply to cheap right now, to drive real sustainable project finance, that price point has to lift significantly.

Carbon Credits Volume Will be 40x More, Prices Will be $150/Ton by 2035

The analysis suggests credit prices can rise from under $25/tCO2e today to $80-150/tCO2e in 2035. And they’ll continue to rise to $150-$200/tCOe in 2050 (in real 2020 dollars).

Another key analysis by EY is that tightening emissions budgets will affect the mix of carbon credits demanded and how they are used. Tighter Emissions Budgets Drive Removals-based Credits Up Changes in technology costs and policy context will shift baselines for carbon credit offset projects.

These will make it harder to create credits based on avoided emissions while boosting the role of removals-based credits. And so, removal credits become essential in net zero scenarios.

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Prediction 2: Technological Advancements

The voluntary carbon market in 2024 is expected to be significantly influenced by technological advancements. These innovations are likely to enhance the efficiency, transparency, and accessibility of carbon trading.

1) Blockchain and Carbon Trading

Blockchain technology is predicted to revolutionize the way carbon credits are traded and tracked. By providing a transparent and immutable ledger, blockchain can help alleviate concerns around double counting and credit authenticity. A study by the World Bank highlights the potential for blockchain to streamline carbon credit transactions, making them more secure and efficient.

2) AI in Project Verification

Artificial intelligence (AI) is set to play a pivotal role in the verification and monitoring of carbon offset projects. AI can process vast amounts of data to ensure projects are delivering the promised carbon reductions. The Environmental Defense Fund emphasizes the role of AI in enhancing the integrity of carbon markets, ensuring that credits represent genuine, verifiable emission reductions.

3) Remote Sensing for Real-Time Monitoring

Remote sensing technologies, including satellite imagery and drones, are expected to advance the real-time monitoring of carbon offset projects. These tools provide tangible evidence of a project's impact, offering transparency to buyers and ensuring continuous project efficacy. The International Carbon Reduction and Offset Alliance (ICROA) notes that such technologies will be crucial in providing assurance and trust in the voluntary carbon market.

If this area interests you then I suggest you take a look at Pachama who arguably was one of the first to tackle the concept of using satellite and lidar technology to measure and validate the tree stock in global forests.

Prediction 3: Regulatory Changes

Regulatory developments are expected to play a significant role in shaping the voluntary carbon market in 2024.

1) Standardization of Carbon Credits

A major regulatory shift anticipated is the standardization of carbon credits. This move, as discussed in reports by the International Emissions Trading Association (IETA), aims to ensure consistency and reliability across different projects and regions. Standardization would address current challenges in comparing and valuing credits, fostering a more efficient and credible market.

2) Enhanced Transparency and Reporting Requirements

Regulatory bodies are expected to implement stricter transparency and reporting requirements for carbon offset projects. According to the Carbon Disclosure Project (CDP), these measures are crucial for maintaining market integrity and investor confidence. Enhanced reporting will likely include more detailed information on project outcomes, methodologies, and long-term sustainability.

3) Government Involvement and Support

Governments are predicted to show increased interest and support for the voluntary carbon market. Policies encouraging corporate carbon offsetting and providing incentives for carbon reduction projects could emerge. The Climate Policy Initiative (CPI) suggests that such government interventions could significantly boost market growth and effectiveness.

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Prediction 4: Diversification of Carbon Offsets

The range of projects and initiatives within the voluntary carbon market is expected to diversify considerably in 2024.

1) Innovative Carbon Reduction Projects

New types of carbon reduction projects are likely to emerge, going beyond traditional reforestation or renewable energy projects. Innovations may include advanced carbon capture technologies and nature-based solutions, as highlighted by the World Resources Institute (WRI). This diversification reflects an evolving understanding of effective carbon offset strategies.

2) Community-Based and Socially-Focused Projects

There is an increasing trend towards community-based and socially-focused carbon offset projects. These projects, as noted by the United Nations Framework Convention on Climate Change (UNFCCC ), not only reduce carbon emissions but also provide social and economic benefits to local communities. The emphasis on co-benefits is expected to attract a broader range of investors and participants to the market.

3) Geographical Expansion

The voluntary carbon market is predicted to see a geographical expansion, with more projects originating from regions previously underrepresented, particularly in Africa and Asia. The Global Carbon Council (GCC) notes that this expansion is crucial for global emission reduction efforts and provides new opportunities for investment in these regions.

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Prediction 5: Increased Corporate Participation

Corporate engagement in the voluntary carbon market is set to escalate in 2024.

1) Rise in Corporate Carbon Neutrality Commitments

An increasing number of corporations are committing to carbon neutrality or net-zero targets, driving demand for carbon credits. The Carbon Majors Database indicates a significant uptick in such commitments, particularly among Fortune 500 companies, signalling a shift in corporate environmental responsibility.

2) Integration of Carbon Offsetting in Business Strategies

Carbon offsetting is expected to become an integral part of business strategies. As per the Business and Sustainable Development Commission, companies are increasingly viewing carbon offsetting not just as a compliance tool, but as a component of corporate sustainability and responsibility, enhancing brand value and customer loyalty.

3) Collaborations and Partnerships

Collaborations between corporations and carbon offset providers are predicted to increase. These partnerships, as seen in case studies from the Greenhouse Gas Protocol, facilitate tailored carbon offset solutions that align with specific corporate goals, creating more impactful and strategic offsetting initiatives.

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What's the Summary of all this?

Well, the voluntary carbon market in 2024 is poised for significant transformations, which is exactly what is needed. Characterised by growth in market volume, technological advancements, regulatory changes, diversification of carbon offsets, and increased corporate participation. These trends signify a maturing market, increasingly seen as a vital tool in the global fight against climate change.

The current state of the voluntary carbon market reflects a dynamic and evolving landscape, driven by the urgent need for climate action. Looking forward, these predictions suggest a future where the market is not only larger and more diverse but also more integrated into global economic and environmental strategies. For stakeholders, these trends offer both opportunities and challenges, underscoring the need for continued innovation, collaboration, and commitment to ensuring the market's integrity and effectiveness in contributing to global emission reduction goals.

As we progress into the year I will continue to combine industry resources and provide as much insight as I can to our customers and followers. The VCM is like a chameleon, ever-changing colour and keeping track is no easy feat.