Patch Insights: May 2024

Patch Insights offers trends and takeaways from the voluntary carbon market, curated by the Patch team. From policy news to demand trends to project developer updates, each month we’re sharing what stood out as we work together to scale global climate solutions.

This month we’re looking at the major demand signals for high-integrity carbon credits the U.S. government provided in the form of policy statements, standards framework, and procurement prizes. We’re also synthesizing two major market reports released this month (hint: markets are stabilizing and project-type preferences are showing through).

The U.S. government weighs in the voluntary carbon market ????

Earlier this week, the U.S. government released a?Joint Policy Statement and Principles for High-Integrity Voluntary Carbon Markets, clarifying the now-official U.S. position that high-integrity carbon markets play an important role in reaching global climate targets. By bringing together bodies across the government, from the Departments of Treasury, Agriculture, and Energy to White House advisors, the administration is sending a clear signal: it’s all in on the VCM, and it’s a priority across the executive branch.

In the announcement, Treasury Secretary Janet Yellen said, “let me be clear: we applaud companies that finance decarbonization through purchase of high-integrity credits.” This is the biggest signal corporates can expect from government on how they should engage with VCMs and carbon credits. Buyers who are hesitating to engage with the market for lack of clarity on what “good” participation looks should now be rethinking their stance.

For the most part, the principles laid out by the U.S. government don’t contain anything you won’t recognize from the major standards bodies, but rather?reiterate generally accepted core integrity principles on both the demand and supply sides of the market?developed by leading voluntary initiatives including The Integrity Council for the Voluntary Carbon Market (ICVCM) and VCMI .

One element that did stand out was a call for demand-side credit standards to?consider allowing companies to count credits toward a portion of their Scope 3 emissions targets. This question has loomed large for the likes of standards setters like SBTi, but its clear the market is directionally moving towards allowing for the use of high-integrity credits in Scope 3 targets.

You can read Patch’s full analysis of this monumental announcement on our blog here .

The U.S. Department of Energy paves the way for high-integrity procurement ??

The momentum underneath American CDR continued this week as the Department of Energy (DOE) unveiled the 24 semifinalists under consideration for the Carbon Dioxide Removal Purchase Pilot Prize . They’ll receive $1.2 million to scale up their technologies and are now competing for DOE Purchase Agreement award of up to $3 million.

The prize is intended to help jumpstart development of innovative CDR projects in addition to demonstrating to the private sector that there are viable and impactful ways to provide early support and demand signals to the budding CDR industry. It’s a meaningful signal, but in the end, it’s private purchasing that will drive the success of these solutions.

The DOE invested a huge amount of diligence and research into identifying these semifinalists. These are some of the most promising and rigorously vetted engineered carbon removal projects on the market. You can enjoy the rewards of the DOE’s work to de-risk these credits by accessing the Department of Energy Collection on the Patch platform — including Eion Carbon , Carbon Lockdown , CarbonCapture Inc. , Charm Industrial , Vaulted Deep , Lithos Carbon and more. Contact us to learn more.

Themes emerging from 2024 state of the market reports ??

The month of May yielded two telling reports on the state of carbon markets. Our team dug into the 世界银行 's 2024 State and Trends of Carbon Pricing and Ecosystem Marketplace 's State of the Voluntary Carbon Market 2024 and a few themes stood out:

• Voluntary carbon markets are stabilizing: Voluntary carbon markets still make up 90% of total demand for carbon credits, and while overall volumes fell in 2023, specific project types grew in prices and transactions.
• Co-benefits are increasingly important: Credits with co-benefits — like cookstoves, which offer social benefits outside of their carbon value — are increasing in demand and price. Ecosystem Marketplace reported credits with co-benefits were 37% more expensive in 2023 compare to those without.
• Numbers show nature-based projects are still in demand: While REDD+ avoidance projects continued to take a hit (volume fell by 51%), nature-based carbon removal projects soared. Afforestation, reforestation, and revegetation (ARR) project prices increased by 31% and improved forest management (IFM) prices increased by 11%.
• Integrity is front and center, laying the groundwork for renewed buyer confidence: Both reports recognized the benefits of programs that rebuild trust and establish high-quality standards —?including ICVCM and VCMI ?—?are likely to begin to be realized during 2024.