The GHG Market Sentiment Survey 2023, commissioned by IETA and PwC, has demonstrated a strong sense of optimism among carbon market participants with expectations that the carbon prices will rise.
The positive survey results come after a rocky few months for carbon markets, which have weathered economic instability, political uncertainty and media criticism largely exaggerated with sensationalist headlines. But they remain steadfast as, despite this, respondents and Voluntary Carbon Market stakeholders are confident that a raft of new reforms and integrity initiatives will drive market prices up, and enable carbon markets to meet increasing demand for carbon reductions. The optimistic sentiment across the 187 IETA members echoes research from earlier this year that suggested the Voluntary Carbon Market is on track to become a trillion dollar industry.
Voluntary Carbon Market is well-placed to meet increasing demand
According to the report, almost three-quarters of respondents felt that the Voluntary Carbon Market is well-placed to meet increasing demand from companies seeking to reduce their emissions. 71% of respondents said they are confident that the market will be able to supply enough emissions reductions to meet growing demand. This is an uptick of 5% compared to the 66% who said the same in last year’s poll.
External factors and economic policies have contributed towards the expectations of growth, with the implementation of the revised EU ETS Directive – the world’s biggest and first major compliance carbon market – was noted as a primary driver of price changes in the EU’s carbon market. Respondents identified the revised EU ETS Directive and setting the trading bloc’s 2040 climate target as the two main factors that will influence the future global carbon prices.
Although there has been a slight decline in the carbon offset price expectations compared to last year’s survey, respondents this year said they expect prices for standardised N-GEO contracts to average $20.00 between 2023 and 2025,
Nature-based carbon credits still favoured in Voluntary Carbon Market
Nature-based carbon credits have remained popular among market participants and their status as the most coveted carbon credits is evident in the survey results. Most of the respondents indicated they planned to use nature-based credits in their offsetting strategy. 72% of those polled also said they expect the carbon offset credit to more clearly make the distinction between reduction/avoidance credits and carbon removal credits – showing the anticipation of further restructuring in the sector.
The past few years has seen significant investment form the Integrity Council for the Voluntary Carbon Market (IC-VCM) to improve and enhance the integrity of carbon offsets. This was also positively reflected in the survey, with a third of responses saying the IC-VCM’s new Core Carbon Principles (CCPs) will improve the integrity of voluntary carbon offsets.
This was also welcomed by Andrea Abrahams, Managing Director of voluntary markets at IETA who said:
“The voluntary carbon market has experienced a challenging period, but the work of organisations like the IC-VCM is only just beginning. Stakeholders are fully committed to improving the integrity and reliability of carbon offsets so that the global community can confidently undertake decarbonisation plans knowing that they will be acquiring permanent, verified emission reductions.”
Strong confidence in scaling carbon markets to meet demand
The IETA survey respondents expressed strong confidence that the voluntary market has the capacity to scale up to meet the potential additional demand during the course of this decade.
With net zero targets being mandated globally, more private sector entities are pledging to take action to address their internal greenhouse gas emissions, with high-quality carbon offsets being key part of their sustainability and climate mitigation strategies.
Reflecting this, the IETA survey respondents expressed strong confidence that the voluntary market has the capacity to scale up to meet this potential new demand in the years leading up to 2030. While some benchmark prices for carbon offsets might see a dip in value, others will increase, and there is an underlying optimism about the future growth of the market.
One thing is resoundingly clear from this latest research: the market is developing both in scale and resilience. This will serve the market well in the coming years as it navigates the challenges of scaling, and negotiating international frameworks and standards to support more corporations, organisations and countries to implement their emissions reductions.