Voluntary carbon markets quarterly: standards and integrity take centre stage

In this quarterly look at the market, Chris Spry, Head of Carbon Markets, takes stock of recent news and milestones.

In this update:

  • Market standards and integrity 
  • UK developments
  • EU developments
  • Rest of world developments 
  • General market data 

Market standards and integrity

VCMI supplements its Claims Code of Practice

The Voluntary Carbon Markets Integrity (VCMI) initiative released additional guidance to supplement its Claims Code of Practice. It’s now ready for use and companies can directly make claims against it. 

According to the Code of Practice, the carbon credits a company uses must be of the highest quality, both to underpin the credibility of its claims and to help drive integrity across the market. VCMI defines high-quality carbon credits as those that meet the Integrity Council for the Voluntary Carbon Market (ICVCM) Core Carbon Principles [1] and qualify under its Assessment Framework. For further information on their collaboration see our COP28 update.

Each claim is ranked as Silver, Gold or Platinum and is based on the amount of residual emissions being offset. 

Verra launches new methodologies 

Verra released its new afforestation, reforestation and revegetation (ARR) methodology VM0047 at the end of September 2023 alongside a new leakage module, VMD0054 Module for Estimating Leakage from ARR Activities. VMD0054 must be employed by projects registered under VM0047. Generally, the methodology has been seen as an improvement, particularly in the dynamic baselines that test additionality and establish the crediting baselines at every verification. 

Verra has also unveiled its new REDD+ methodology (VM0048), which looks to prevent the over-crediting from REDD+ projects and the low prices of credits issued. The biggest change in what Verra calls a ‘revolutionary’ update is usage of Jurisdictional REDD+ baselines rather than developers determining their own; Verra will now lead on establishing project baselines. Data for these baselines will be sourced from high-quality service providers, in compliance with stringent accuracy requirements.

Unusually, the new methodology will be applied retroactively to existing projects that will have six months to comply before having to issue credits under VM0048. Indeed, projects using some older REDD+ methodologies (e.g.VM009) will have to provide compensation to credit buyers if VM0048 methodology results in a baseline with fewer credits.

Verra continues to evolve and respond to the need for the VCM and the increasing demand for integrity.

CORSIA Pilot phase ends and Phase 1 takes off

The CORSIA (Carbon Offsetting Reduction Scheme for International Aviation)  is evolving from Pilot to  Phase 1. The price of CORSIA (Carbon Offsetting Reduction Scheme for International Aviation) Pilot credits were between $0.50 per tonne, whereas prices of Phase 1 credits, which can only be purchased from issuances from either American Carbon Registry (ACR) or Architecture for REDD+ Transactions (ART), have cleared between $8.5 and $10.5 range (albeit with low volumes).

CORSIA Phase 1 holds substantial importance for the aviation industry. Like the Pilot, it is voluntary for countries but for airlines Phase 1 compliance is mandatory for international flights between participants. A total of 126 countries are participating in Phase 1.

The current uncertainties surrounding approved methodologies and market factors have hindered airlines from defining and implementing their Phase 1 CORSIA strategies. Encouragingly, increased clarity on methodologies is just around the corner, with further confirmations expected in the next two months.

UK developments

UK develops Carbon Border Adjustment Mechanism (CBAM)

The UK’s move to industrial decarbonisation risks carbon leakage as not all jurisdictions are moving at the same pace. Carbon leakage is the movement of production and associated emissions from one country to another due to different levels of decarbonisation effort through carbon pricing and climate regulation. The UK imports various industrial goods that have significant carbon emissions, and some groups have suggested that production has moved overseas, because its cheaper and lacks any associated carbon regulation. The CBAM policy looks to correct that by applying: 

  • the greenhouse gas emissions intensity of the imported good 
  • the gap between the carbon price applied in the country of origin (if any) and the carbon price that would apply to the good if produced in the UK.

CBAM liability will lie directly with the importer of products within scope of the UK CBAM. The products in scope include emission intensive industrial goods such as aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron, and steel. The government will implement a UK CBAM by 2027.

National Grid data shows large uptake of renewable supply 

The Electricity System Operator (ESO) provides a substantial amount of data around the supply of electricity to Great Britain. The data portal not only provides historic data but also shows its electricity forecasts for the short-term future. As an example of the data, the chart below (Figure.1) compares the percentage of total electricity provided by renewables in both 2009 and 2023, comparing percentage of total energy provided (y-axis) across various days of the year (x-axis). There has clearly been huge improvement in the use of renewables as a source for the country’s power needs. The volatility of that share is due to variations in the weather, such as windless days. It is apparent from charts such as this that energy storage must grow alongside renewable generation capacity and that the country increases geographical diversity of renewable production.


Figure 1: % of power generation to National Grid from renewables (hydro, wind and solar)

Source: Quantum Commodity Intelligence [1]


Turkey develops ETS regulation

The EU CBAM was the first of its kind globally and was approved by the EU in late 2022. The law came into force in October 2023 requiring data gathering and reporting, but it will be applied gradually over the next three years and payments will start in 2026. Many countries that export to the EU have complained about the possible negative impact it would have on their respective domestic industries. Turkey, a larger energy intensive exporter to the EU, has been vocal in this regard but has decided to work with the regulation by implementing its own Emissions Trading Scheme (ETS). The details of the law from the Ministry of Environment are still being developed but there will be two phases with the pilot phase lasting three years. A start date has yet to be determined.

Countdown begins for EU deforestation regulation

On 29 June 2023, the EU Regulation on Deforestation-free supply chains (EUDR), a key step in the fight against climate change and biodiversity loss, entered into force. It reflects the EU’s desire to no longer drive global deforestation through their consumption. The main driver of the regulation is the expansion of agricultural land that is linked to the production of commodities like soy, beef, palm oil, wood, cocoa, coffee, rubber, and some of their derived products, such as leather, chocolate, tyres and furniture. As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU is partly responsible for this problem, and it wants to lead the way in solving it. 

Under the Regulation, any operator or trader who places these commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation. The regulation will be brought into application on 30 December 2024 (18 months transition) and on 30 June 2025 (24 months transition) for micro and small enterprises.

Rest of the world developments

Tokyo stock exchange launches JPX – a carbon credit auction platform

In April 2023 Japan launched the first phase of its Emission Trading System (GX-ETS). Phase 1 will be voluntary and end in March 2026. Thereafter the system will transition to a more traditional ETS. A total of 679 entities have enrolled and must include a long-term goal of carbon neutrality by 2050.

As part of its climate strategy, Japan created a carbon credit market, which launched in October 2023. The Japan Exchange Group (part of the Tokyo Stock Exchange) will auction J-Credits (a voluntary carbon credit) and will include avoided/reduced as well as removal credits and only from domestic projects. Under the J-Credit scheme, the government certifies the amount of greenhouse gas emissions (such as CO2) reduced or removed by sinks through efforts to introduce energy-saving devices and manage forests. 

More than 200 members have registered to participate. While J-Credit auctions have been held periodically by the government since 2013, the formal exchange was launched after a trial phase that started in April 2023.

Late 2023 start for Taiwan Carbon Solutions Exchange

In response to the country’s 2050 Net Zero goal and the Climate Change Response Act, Taiwan launched the TCX International Carbon Credit Trading Platform on 26 December 2023. This listed seven carbon credit projects in the initial batch, including safe water, solar power generation, wind power generation and biogas power generation. The project sites are in Asia, Africa and South America, and the sellers are from Switzerland, the UK, Singapore and Taiwan.

On the same day as the launch, the platform successfully conducted its first day of trading a total of 88,520 tonnes of carbon dioxide equivalent carbon credits, with a transaction price of between $3.5 and $12 per tonne. One of the major sales made on TCX’s first day was the trade of 6,257 tonnes of carbon credits from Taiwanese seller Sacurn Carbon, generated from a biogas project in Kenya.

General market data – VCC prices in 2023

The theme for prices in 2023 was the push for quality. The demand from buyers has been focused on high-quality removal projects, whereas low-quality avoidance projects have suffered.


Figure 2: Normalised prices in 2023 – the push for quality

Source: Quantum Commodity Intelligence [1]

REDD Vs Blue: Figure 2 shows the change in prices (US dollars per tonne) in 2023 for REDD+ projects (avoided deforestation projects, generally considered lower-quality) and blue carbon projects (mangrove projects, generally considered higher-quality), normalised to their price at the start of 2023. Higher-quality projects have maintained their prices.


Figure 3: Downward sloping vintage curves imply levels of project risk

Source: Quantum Commodity Intelligence [1]

Downward Curve: Newer vintages of voluntary carbon credits (VCCs) tend to be priced at a premium to older vintages; this trend has maintained throughout 2023. For example, Figure 3 shows the curves for several vintages of different types of projects. Newer vintages can benefit from more recent methodologies and are optically better when offsetting more recent emissions.

Despite the push for quality, and an increase in the scrutiny applied to the VCM, VCC retirements in 2023 (YTD) have broadly kept pace with 2022 (Figure.4):


Figure 4: VCC retirements 2022 vs 2023

Source: Quantum Commodity Intelligence [1]

The number of credits retired in 2023 was 176.7m (compared with 169.8m in 2022, 165.1m in 2021 and 98.4m in 2020). Companies have continued to use voluntary carbon credits as part of their climate strategies, despite an increase in criticism aimed at the VCM.


Figure 5: When do companies retire VCCs?

Source: Quantum Commodity Intelligence [1]

Throughout 2021, 2022 and 2023 some weeks appear to have been hotspots for VCC retirements (see Figure 5). For instance, in all three years businesses retired a large volume of credits in the final two weeks of the year.



[1] Quantum Commodity Intelligence

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

This article does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in The Netherlands, authorised and supervised by De Nederlandsche Bank, the European Central Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, The Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, The Netherlands. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc. NatWest Markets Securities Japan Limited [Kanto Financial Bureau (Kin-sho) No. 202] is authorised and regulated by the Japan Financial Services Agency. Securities business in the United States is conducted through NatWest Markets Securities Inc., a FINRA registered broker-dealer (http://www.finra.org), a SIPC member (www.sipc.org) and a wholly owned indirect subsidiary of NatWest Markets Plc.

Copyright © NatWest Markets Plc. All rights reserved.

scroll to top