FEATURE: After two weeks, Platts CEC higher ahead of Biden inauguration

The Platts CEC assessment ended its second week higher, ahead of Joe Biden's inauguration as US president on Jan. 20 and the expected start of his ambitious climate agenda.

The assessment, which reflects CORSIA-eligible voluntary carbon credits, closed the week Jan. 15 at $1.10/mtCO2e, up 30 cents from its Jan. 4 launch at 80 cents/mtCO2e. The CEC first rose 10 cents/mtC02e on Jan. 6 following the Democratic Senate victories in Georgia, before climbing further the week of Jan. 11.

"We're going to see a bit more environmental consensus," a market source said.

Biden's environmental agenda is ambitious, and he has vowed to re-join the Paris Agreement as a matter of priority after he takes office on Jan. 20. With the Democratic Party in control of the presidency and both houses of Congress for the first time since 2010, it now has a mandate to pursue its climate goals in a way it has been unable to in more than a decade. This has the potential to be bullish for some environmental markets, although the full impact on the voluntary carbon market in the medium to long term is far from certain.

Focus within the private sector has turned increasingly towards the voluntary carbon markets over the last several years, with many large corporations setting ambitious carbon neutrality goals and expecting to rely heavily on carbon credits to offset emissions.

However, it remains unclear how supply is expected to meet growing demand, with the voluntary market still small in relation to expected demand growth over the next several years, particularly for high-quality, recently issued credits with strong project co-benefits.

One market participant estimated the market is likely to be "undersupplied by 2025, or maybe even earlier."

Further, the voluntary market remains diffuse, with a wide range of prices reported for different types of credits.

"It really depends on which credits," a buyer said. "With a lot of voluntary carbon credits, companies will really care what they buy, and there can be a marketing component around that as well."

Platts heard indications for voluntary carbon credits the week of Jan. 11 as high as Eur12/mtCO2e for Gold Standard-certified reforestation credits of recent vintage, while renewable energy credits from 2016 were heard as low as 85 cents/mtCO2e. Carbon credits from older vintages often trade at a discount to newer ones.

CORSIA is the International Civil Aviation Organization regulatory scheme for emissions reduction. While the voluntary component of the project has taken effect for 2021 – with mandatory compliance set to kick in later in the decade – the coronavirus pandemic has meant that many airlines have not yet fully engaged with it.

The Platts CEC, which does not account for co-benefits or geographic premiums, is typically assessed at a slight discount to other types of voluntary carbon credits, which may be for projects that reflect specific geographies pricing at a premium or include additional co-benefits. However, Platts CEC also does not reflect all of the standards reflected within the CORSIA scheme, which means it has so far been assessed at a slight premium to other parts of the market.