INTERVIEW: Growing corporate demand for offsets despite policy headwinds

The voluntary carbon market is positioned to scale up significantly, driven by improved project methodologies and growing corporate demand for high-integrity carbon credits, despite potential policy headwinds from shifting government priorities, Tom Montag, CEO of Rubicon Carbon, said in an interview.

"Amid the policy landscape, companies are continuing to pursue their sustainability strategies and increasingly recognize the role of carbon credits in those efforts," Montag told Platts, part of S&P Global Commodity Insights. "Fortunately, the VCM is not constrained by government regulation precisely because of its voluntary nature."

Montag said the company's recent agreements with tech giants Microsoft and ByteDance prove that corporate demand for offsets is starting to climb steadily after a few fallow years.

"This sends a signal that corporate leadership, greater transparency, and growing demand will drive the growth of the carbon market," he added.

Market growth

Montag emphasized that the EU's recent move to allow the use of international carbon credits to help meet its ambitious 2040 climate target was another example of a market waiting for liftoff.

"This means that anything offered within the VCM is now fair game. While we'd like to see this percentage increase, the 3% allocation is a start toward recognizing the market's effectiveness," he added.

Rubicon Carbon is a carbon investment firm specializing in curating high-integrity carbon credits and creating diversified portfolios to help organizations achieve their climate and sustainability goals.

Key factors for market growth include increased standardization for project verification and carbon accounting, consistent quality benchmarks with uniform standards, and market signals and incentives, according to Montag.

In May, Microsoft signed a framework agreement with Rubicon for the purchase of 18 million mt of high-quality carbon removal credits from global afforestation, reforestation and revegetation projects. ARR projects aim to grow new or additional forests or restore degraded land through tree and vegetation planting and soil conservation, and come under the nature-based carbon removals segment.

The VCM has faced intense scrutiny recently, with media outlets and academics questioning carbon project effectiveness and credit integrity.

Despite these challenges, the market shows signs of recovery as credit issuances and retirements rise. This uptick suggests stakeholders are addressing quality and transparency concerns, potentially marking a turning point as the VCM works to restore credibility and investor confidence.

Broad approach

Rubicon Carbon manages credits across all categories including nature-based emissions reduction, engineered or tech carbon removal, and super pollutant elimination.

"We believe in an all-of-the-above approach — where high-quality credits are available across all categories, including reduction, avoidance, removal, and beyond," Montag said. "We believe that all the tools in the toolbox should be used to address the climate crisis, meaning that every high-quality solution is important."

This comes as there has been a growing divide in the industry between credits that reduce emissions and those that remove CO2 or emissions.

"We are hopeful that in the near future, we'll see a re-emergence of high-quality conservation-based credits," added Montag.

The price of credits from technology-based carbon removal projects has consistently traded at a significant premium to other types of removal credits.

Platts, part of S&P Global Commodity Insights, assessed the price of natural carbon capture Sept. 10 at $13.46/mtCO2e. These credits are linked to removal projects aimed at reducing greenhouse gas emissions that fall within the agriculture, forestry and land use category, which includes reforestation and afforestation projects, soil sequestration — not including biochar — and wetland restoration.

Meanwhile, the Platts Tech US Biochar price was assessed at $145/mtCO2e on Sept. 10.