Market could lose out on 4.8 GT of credits issued by 2030
LONDON–(BUSINESS WIRE)–Today, climate tech start-up Thallo released a report that aggregates carbon project developer input and highlights challenges to scaling the voluntary carbon market. The report identifies key bottlenecks including verification delays, limited access to early-stage financing, and inefficiencies in the value chain caused by intermediaries. The report also highlights solutions to scaling the VCM, specifically improved financing through forward models.
Key findings from Fast Forward, Challenges to Scaling the Voluntary Carbon Market include:
Registries and validation & verification bodies (VVBs) are key bottlenecks: verification-related delays could cost project developers up to $2.6 billion and mean 4.8 gigatonnes in undeployed credits by 2030.
- Eliminating unnecessary verification wait times could double the speed of credit issuance.
- Delays hurt local communities, which often only see co-benefits materialize when carbon credit revenues come in.
Financing is a barrier: 90% of contributors agree that forward products will be key to scaling the voluntary carbon market (VCM).
- Small to midsize project developers face the greatest financing challenges. The most prevalent financing methods include forward purchase agreements and own funding.
Intermediaries capture significant value: investors and brokers made up one-third of the average credit price in 2021.
- This means $650 million of carbon market value went to investors and brokers – not project developers – in 2021.
- In a worst case scenario, expensive investors and high-margin brokers could take as much as 78% of the revenues of the sale of offsets to end-buyers. On average, almost one-third of the revenues generated in 2021 filled the pockets of these intermediaries.
The report explores forward models as a way to help scale the carbon market. Fast Forward explores forward financing by registries, through Projected Carbon Units (Verra) and Planned Emission Reductions (Gold Standard). Traditional exchanges like CBL and ICE are offering futures, but most have vintages in the past. Web3 projects such as Ivy Protocol, Carb0n.fi, Solid World DAO, Flowcarbon and Greentrade are also developing standardized platforms for forward models.
The Fast Forward report includes input from the following organizations: Aider, Bio Carbon Partners, Biofix, Blue Carbon Initiative, Carbon Check, Carb0n.fi, Carbon-Plus Capital, Carbon Tanzania, Climate Focus, ClimeTrek, Ecoregistry, Ecosecurities, Fairatmos, Fix6, For Trees Club, Greenoxx, Greentrade, Inherit Carbon Solutions, Inplanet, International Carbon Registry, Ivy Protocol, Kimmeridge, Kita, Respira International, Ripple, Solid World DAO, Space for Giants, Trend CO2, Udaipur Urja Initiatives, Undo and Verra.
Thallo uses first-of-its-kind blockchain technology to revolutionize and democratize the carbon markets, making it easier for buyers and sellers of high-quality carbon credits to find each other. Its team of veteran blockchain entrepreneurs and climate tech professionals combine technological expertise with deep sustainability knowledge to build the carbon marketplace of the future. Follow Thallo on Twitter and LinkedIn or join our Telegram group for updates. For more information, visit www.thallo.io.