Colombia's carbon market faces price drop, oversupply amid government 'scam' claims

Colombia's carbon market grapples with declining prices and investor uncertainty amid recent government statements labeling it a "scam." According to Asocarbono, over 60 million credits have flooded the market, pushing prices down since November 2022. Parallel to the oversupply, the market has been affected by rising concerns about its integrity and future viability.

Since the tax reform in late 2022, Colombia has experienced a surplus of carbon credits, resulting in a significant price drop, also due to the existing oversupply of REDD+ credits in the country.

Despite the government's push for reform on carbon credits and enhanced transparency instruments, there has been little progress on the regulation of carbon markets in the country, including the formulation of the Emissions Trading System. Asocarbono emphasized the importance of transparency and regulation to enhance trust in the market, which has become increasingly vital as political rhetoric threatens to undermine investor confidence.

Indigenous communities in Colombia rely on limited transfers from the central government and utilize carbon markets and REDD+ projects for essential resources, according to Asocarbono. These projects are crucial for their economic stability.

Generalization kills the carbon market: indigenous leader

An Indigenous leader in Colombia said to Platts that their partner in developing a REDD+ project has empowered the community to take ownership of it from design to implementation. However, the leader pointed out that "some projects are poorly managed and do not distribute resources fairly." They emphasized, "Generalization kills the [carbon] market. When the Presidency assumes that all carbon projects are flawed, it discourages investors from purchasing credits. It is vital to discuss specific cases of mismanagement while also recognizing successful projects, such as ours."

The indigenous leader stated that liquidity issues are limiting the budget for community organization. However, they remain optimistic about the future of REDD+ credits in Colombia. "With proper regulation and visibility of projects, we believe we can continue. Another alternative we are exploring is biodiversity credits."

Need for clarity and legal security from the regulations

"We need clarity and legal security for all market participants," noted Asocarbono, further explaining that the absence of defined regulations for carbon credits complicates the situation, affecting local communities who rely on these resources.

"The president's comments do not help; they stigmatize the sector and make Colombian credits less competitive from an international perspective," said Federico Arana of CO2CERO. "Of course, there have been projects with integrity issues, but not all of them are bad, and actually, these credits are a tool to preserve nature, supporting local communities, which have been presidential priorities."

Market participants from Colombia have pointed out that the government's lack of clear understanding regarding carbon markets has led to confusion and fears in Colombia. Platts reached out to Colombia's presidential office for a comment on the matter, but they declined to provide a response.

Asocarbono advocated for the adoption of recommendations from the established Commission for the Promotion and Development of Carbon Markets in Colombia (CEMCO2) to strengthen market regulation without stifling its growth.

"Developers should act as technical advisors, while communities retain ownership and decision-making authority to ensure legitimacy and rights protection," Asocarbono stated.

The Platts Nature-based Avoidance South America Current Year price was assessed at 6.00/mtCO2e on July 2. Colombian REDD+ credits continue to trade at a discount with project-specific offers heard well below regional averages, reflecting persistent oversupply and weak market sentiment.

Platts heard offers for VCS-CCB certified REDD+ ID 1566 (Mataven) 2019 vintage credits at $1.25/mtCO2e, underscoring the depth of the Colombian discount. By comparison, similar REDD+ projects in Brazil have been seen trading in the $5–6/mtCO2e range, while some high-quality Peruvian projects have reportedly fetched as much as $10–12/mtCO2e, according to recent Platts data.

Platts is part of S&P Global Energy.