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Voluntary carbon offset prices to triple by 2035 according to Ernst & Young

Global consultancy firm Ernst&Young published their report earlier this week in which they state the price of voluntary carbon offsets is likely to triple between now and 2035 and could rise as much as six times.

In a report by Ernst & Young consultants calculated and expect prices to rise to $80 to $150 per tonne of CO2 by 2035 and to increase further towards the $150 to $200 price range by 2050 due to rising demand from the corporate sector not subject to emission trading schemes.

Current models show a 20-fold increase of credit volume required globally by 2035, with volumes even increasing 30 to 40-fold from current levels in scenarios consistent with the Paris Agreement on climate change. Without carbon credits, net-zero emissions cannot be achieved between now and 2035. So these will become increasingly scarce and expensive in the years ahead.

Achieving a 1.5°C net zero trajectory requires deeper and more rapid reductions in low and medium-income nations relative to the Below 2°C scenario. This constrains the space for these nations to create avoidance-based credits and increases the contribution of removals-based credits.

Carbon credits will be an essential part of the business toolkit, supporting earlier and more ambitious net-zero commitments.

Ernst&Young expects more and more sectors will be subject to carbon taxes over time, thus reducing the space for voluntary carbon commitments and drawing attention to co-benefits as a point of differentiation between businesses.

The supply of credits will become more standardized, including in relation to co-benefits, driven by competitive pressures and the requirement to scale up supply.

Tightening national emissions budgets will drive governments to impose more stringent regulatory requirements on organizations over time.

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The cost savings from credits and offsets are substantial

The EY Net Zero Center, which combines Ernst & Youns strategic insight, expertise, and deep knowledge in energy and climate change leadership, sets out to move towards a net zero future by 2050.

In their latest analysis, they find that to achieve cost-effective emissions reduction, offsets are essential since they lower the cost of decarbonization by 50% - 80% in Paris consistent scenarios. 

This implies carbon credits have an enduring role in supporting decarbonization and the net-zero transition at multiple scales.

In addition, the logic of achieving net-zero implies that removals-based credits will become increasingly important for offsetting emissions from products that lack low or zero-emissions production methods.

Voluntary carbon offset prices to triple by 2035 according to Ernst&Young

Climate change is a defining challenge for all businesses

To stay in business in a sustainable manner companies will need to adapt. Meeting net-zero can take time and may involve asset turnover or business model evolution.

By using offsets to reduce their emissions today, business leaders can make incremental moves that are painless and profitable in the short term as they move towards net zero in the long term.

Every leader will need a clear decarbonization strategy which recognizes the role of carbon offsets to reduce emissions today and build a strong business tomorrow.

Carbon credits are an essential part of the business toolkit, providing flexibility, control and significant cost savings.

Experts have constructed a 5-step-recurring-model to achieve a successful transition for those who engage early, as they are most likely to flourish in their adaptation.

  1. Act early to create options and manage risks.
  2. Review your long-term strategy
  3. Identify potential tipping points for pressures and opportunities
  4. Articulate several distinctive value propositions for your company in 2030-35
  5. Act now to create options and manage risks

Consider these five steps early and strive for disruptive change in your field.

Managing  stakeholder expectations and competitive pressure are already part of the business toolkit, but tightening emission budgets will evolve rapidly, and expect business owners to make a positive contribution to the defining challenge of our generation.

Increase your position and aim for a net-zero future. See what DGB can do to help you reach your sustainability goals. 

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