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Nature-based credits continue sharp selloff in voluntary carbon markets


N-GEO spot contract at discount to GEO for second consecutive day

VCS-CCB REDD+ credits v18 offered at $1 premium to CME's N-GEO Dec 23

  • Author
  • Silvia Favasuli
  • Editor
  • Alisdair Bowles
  • Commodity
  • Energy Transition Petrochemicals

A selloff on nature-based avoidance carbon credits continued Feb. 3 with Xpansiv CBL's spot standardized N-GEO contract remaining at a discount to CBL's GEO spot contract on Feb. 3 for a second day.

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The N-GEO contract settled late on Feb. 2 at $1.70/mtCO2e, according to Xpansiv CBL data, with bids and offers heard in a range of $1.65-$1.95/mtCO2e at 1200 GMT Feb. 3.

The GEO contract settled Feb. 2 at $2.07/mtCO2e and was heard bid and offered in a $1.95-$2.20/mtCO2e range at 1200 GMT on Feb. 3.

The N-GEO spot contract reflects nature-based carbon credits with a 2016-2022 vintage and customarily trades at a premium over the GEO spot contract, which reflects tech-based (mostly renewable energy) CORSIA-eligible credits with a 2016-2020 vintage.

In the over-the-counter side of the nature-based segment, a batch of 20,000 mt VCS-CCB certified REDD+ credits with a 2018 vintage year were heard offered during the Feb. 3 morning trading session as low as a $1.00/mtCO2e premium to CME's N-GEO December 2023 futures contract.

The credits were sourced from Brazil. The CME's N-GEO December 2023 contract settled Feb. 2 at $2.07/mtCO2e.

While the name of the underlying project was not made public and the only information shared was that the underlying projects was "not one of the best ones," the broker said the offer level was indicative of where the market was going.

"[These sellers] are trying to get ahead of it," the broker said, adding that the offer was a "very aggressive one."

Despite the low offer level, the 2018 vintage REDD+ credits were not finding an interested buyer, the broker said.

Credits from the VCS-CCB Gold certified Southern Cardamom REDD project with a 2018 vintage were heard bid and offered in a $7.00-$9.00/mtCO2e range straight after the 1200 GMT market close of Feb. 3. Southern Cardamom is considered one of the 'high quality' REDD+ projects currently in the market. On Feb. 1, credits from the same project and with a 2018 vintage were heard bid and offered in the $8.50 to $11.00/mtCO2e range.

Another broker said Feb. 2 no bids could be seen in the voluntary carbon markets for REDD+ projects.

REDD+ credits have come under increasing pressure over the past two weeks after the publication on Jan.18 of an article by UK-based Guardian newspaper alleging that 90% of Verra's credits had overestimated their own climate impact and therefore the number of the credits issued. Verra replied to the article with a technical review of the studies which the Guardian based its investigation on and said the studies contained "multiple serious methodological deficiencies."

On Jan. 27, the Dutch platform Follow the Money published a further article questioning the legitimate issuance of credits from the South Pole's VCS-CCB Kariba REDD+ project, one of the most popular and better regarded REDD+ projects in the VCM market.

Rating agency BeZero put the Kariba project on rating watch straight after. BeZero had so far assigned a AA+ to Kariba credits for vintages between 2011 and 2021.