Asia's carbon credit developers mull industrial biochar price cuts to boost demand

Carbon credit developers in Asia are exploring lowering their offers for industrial biochar credits to attract buyers for the premium viewed removal credit, sources told Platts, part of S&P Global Energy, on the sidelines of the Asia Climate Summit July 10 in Bangkok.

A few indicative offers from Indian developers were previously heard at $200-$220/mtCO2e for industrial biochar credits, while recently, Platts heard indicative offers at around $170-$180/mtCO2e levels.

Platts assessed the India biochar price at $140/mtCO2e, while prices for the US biochar were assessed at $148/mtCO2e.

Biochar credits are generated through the production and use of biochar, a stable form of carbon created by pyrolyzing organic materials (such as agricultural waste, forestry residues, or other biomass) in a low-oxygen environment.

Developers Platts spoke to said they were considering lowering their offers to attract more buyers in the market, as only a handful of buyers were interested in purchasing high-tech industrial biochar credits.

The 'handful' of buyers were located mostly in Europe and the US, while demand from buyers in the Asia-Pacific region was "negligible".

Due to high price levels, the buyer pool for high-tech carbon dioxide removal credits has been limited to large technological and financial giants, and most have taken the offtake route compared to spot deals.

An India-based developer said the approach should be to enhance soil and climate conditioning rather than procuring financial gains, and that can happen once prices get competitive.

However, sources mentioned that for liquidity to improve and the market to mature, more buyers were required to enter the market to purchase Tech-based removal credits.

Most of the buyers in the voluntary carbon market currently look at purchasing avoidance credits, such as renewable energy and cookstoves, due to price competitiveness amid abundant supply.

Platts Renewable Energy current year price was assessed at 90 cents/mtCO2e, while the Household Devices current year price was at $2.95/mtCO2e. In comparison, removal credit prices like Natural Carbon Capture, which represents ARR projects and Biochar, India, were much higher at $15.50/mtCO2e and $140/mtCO2e, respectively.

A second India-based developer said the market for removal credits needed to expand beyond the selected few buyers.

"If the giant tech companies suddenly cease procuring removal credits due to some change in their strategy, we need other buyers to sustain the market," the second India-based developer said.

Costing of projects, feedstock procurement challenging

Lowering offers is not the most feasible solution to attract buyers, as the cost of production for industrial biochar is quite high.

Industrial biochar is at a premium to artisanal biochar as production of the former involves an elaborate process called pyrolysis, which involves heavy machinery and continuous supply of biomass feedstock.

Spot prices of industrial biochar in the market from the Asia Pacific region were heard between $130-$150/mtCO2e in the week July 7-11, while artisanal biochar was heard at around $100-$120/mtCO2e.

Procuring biomass feedstock in developing countries such as India and Thailand is quite expensive, as farmers are not willing to provide it easily or at low prices.

A Thailand-based producer said they would explore lowering the offers once they are assured of a steady supply of biomass feedstock at minimal or nil cost.

"We don't get feedstock for free, and farmers insist on being paid immediately upon delivery. They don't wait for us to earn money after sales of credits, so it is not feasible to lower offers now," the Thailand-based producer said.

Further, the producer from the Southeast Asian country said they understood the rationale of lowering offers to attract buyers, but it may not be feasible for them on a cost basis.