November 2023 Voluntary Carbon Offsets Update
News
Department of Energy allocates funds to new carbon capture projects. The US Department of Energy is allocating $890 million to three carbon capture and storage projects to capture, transport, and store carbon emissions to mitigate climate change and protect public health. These projects can potentially reduce CO2 emissions by 7.75 million tonnes annually. The funding is part of the Carbon Capture Demonstration Projects Program, supporting integrated technologies in power plants and hard-to-decarbonize industries. The selected projects include the Baytown Carbon Capture and Storage Project, Project Tundra, and Sutter Decarbonization Project.
The head of carbon trading business group IETA blames the EU for the collapse of COP28 UN climate talks on Article 6 emissions trade. Negotiations fell apart due to irreconcilable differences on carbon crediting under Article 6.4 and international emissions trading technicalities under Article 6.2. The clash revolved around the issue of sovereignty, with the EU and its allies advocating for guardrails while the US and others sought a system with less centralized oversight. Dirk Forrister of IETA criticized the EU for losing the plot and expressed concern that the collapse could lead to a loss of faith in carbon markets. Despite this setback, expectations are that approaches like the voluntary carbon market and bilateral trading arrangements will continue to develop among smaller groups of nations. The first credits under the new 6.4 mechanism are now expected in 2026, a year later than originally anticipated.
Negotiators fail to adopt key texts. Country negotiators at COP28 failed to adopt two key texts on carbon crediting methodologies and international trade, jeopardizing the future of markets as a climate solution under the Paris Agreement. The UAE presidency published 'take or leave' carbon market texts with ambiguous and contentious language on credit authorization, revocation, and methodologies, leading to the rejection of both texts. This setback means that countries may have to start over at COP29 in Baku unless the COP28 presidency manages to salvage the Article 6 texts in a final plenary. The rejection is seen as a major setback for international carbon markets, causing further uncertainty for countries and project developers. There are concerns that the delay may threaten the future of Article 6.4 as a crediting mechanism.
Issuances and retirements rising into year-end
Both issuances and retirements of offsets increased sharply in November, following seasonal trends of higher VCM activity toward the end of the year. Issuances increased by 9.03 million tons to 30.95 million tons. Retirements jumped by 5 million to 14.17 million tons. If seasonal trends hold, it is likely that December will see a further increase in issuances and retirements.
Forestry retirements increase
Retirements from Forestry projects accounted for most of the offsets retired in November, up from 24% in October. Issuances mostly consisted of Forestry and Energy projects. Waste and Landfill issuances and retirements fell sharply.
Bank of surplus credits continues to climb
The bank of offsets increased by 16 million tons, the largest increase since June 2023. The bank currently stands at 1.06 billion tons.