The year 2021 was pivotal for global emissions trading and carbon markets. Existing markets, such as the EU and New Zealand, have begun making changes to be even more ambitious: new markets started operations, such as China’s national ETS, and others are being developed or expanded, such as in Colombia and Chile.
The strong interest in voluntary carbon markets has been reflected in surging corporate moves to net zero, even before governments finalized the framework for Article 6 of the Paris Agreement at the UN climate talks in Glasgow in November 2021. This is all breathing life into the markets of tomorrow which underpins our future.
The carbon markets show no signs of slowing down and the European carbon prices are leading the charge. At the beginning of the year the carbon price was below 30 euros, and towards 2022 surpassed 90 Euros, a 200% surge!
Some stakeholders see the investment opportunity post COP26, others need the carbon markets for their very survival, such as the oil and gas industries.
Cryptocurrency enter carbon markets
Even the crypto industry is also getting into the game. Klima DAO, Moss Carbon Credit and Toucan Protocol are all buying up sizable amounts of carbon credits and putting them on the Blockchain.
Multiple hedge funds have also begun stockpiling carbon credits. There is a finite source of carbon credits and a surge of demand is visible as the world’s countries intend to realise their net zero pledges.
Currently, the voluntary carbon markets are still in their early stages and have only just surpassed the US$1 billion in transaction value in 2021, there is still tremendous amounts of room for growth – as well as plenty of catalysts.
15-fold by 2030 and 100-fold by 2050
The Taskforce on Scaling Voluntary Carbon Markets forecasts that in order to meet the climate change targets as set forth in the Paris Agreement, the voluntary carbon markets will need to grow 15-fold by 2030 – and 100-fold by 2050 – from 2020 levels. Exciting times ahead.
If you’ve been paying attention to carbon prices, you’ll know that they’ve been rising fast. In the wake of COP26, carbon prices skyrocketed - capping off what has already proven to be a record-setting year with prices having more than doubled since January 2021. The carbon markets show no sign of slowing down.
New industries enter carbon markets
Currently, the three biggest sectors operating in the carbon markets are industrials, finance and energy. Industrial and energy carbon credit users are relatively straightforward to understand as industries like steel making and fossil-fueled power plants are heavy emitters. The large amount of carbon credits held by the finance industry are designed for them to retire for themselves, as well as to be utilized as investment assets. Expect the financial industry’s share of carbon credit purchases to grow even larger.
Plenty of businesses and retail investors are looking to the carbon markets for investments that are both rewarding as well as ESG-friendly. You can think of the recent rise in carbon prices as the “first leg” of the carbon credit bull market. Currently, the general public has only just started to appreciate the opportunity and need of this market.
With Article 6 working its final details towards the standardization and regulation of the global voluntary carbon markets, this process will still take many months if not years to complete, this in itself provides a major opportunity for DGB, as we are well positioned to capitalize on the opportunity.
There’s already a fundamental, proven demand for carbon credits driven by legislation backed by nearly every country in the world. There is near universal consensus from governments and private companies who agree that the market needs to expand in order to match global net-zero needs. DGB investors appreciate this market dynamic and the significant opportunity it presents.
At DGB we are immensely proud of what we achieved last year. Following increased awareness generated by COP26 of the net zero agenda, we have seen unprecedented demand for carbon offsetting credits which are being purchased by companies as quickly as they are being generated.
With not enough reforestation taking place to satisfy the demand for carbon offsets to counter the 5 billion trees that are being destroyed every year, it’s vital corporations participate in efforts to increase the number of reforestation projects which will help to meet their net zero targets. Progress seen through our projects in Sierra Leone, Paraguay, Kenya and Cameroon are helping to deliver reforestation at scale.”
DGB is continuing to deliver credible green initiatives, impactful projects on the ground and generate returns to its shareholders. With a project pipeline of 13 million offsets, we are looking forward to building on this progress in 2022.