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US-based forestry projects fetch strong premium to other regions: sources

Highlights

US projects priced at a premium of about $3-$4/mtCO2e

High project development costs boost premiums for US projects

US-based nature-based removals projects are fetching a significant premium to similar projects in other geographical regions, as they could be monitored and verified more easily with lower risk of leakage, sources said.

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Projects from the US are priced at a premium of about $3-$4/mtCO2e, compared with similar projects in other locations, according to sources.

US-based projects of 2020 vintage and American Carbon Registry (ACR) certification were priced between $18-$19/mtCO2e, a trader speaking with S&P Global Platts said, while similar projects and vintage Verified Carbon Standard (VCS)/Climate, Community and Biodiversity Standard (CCB) certification from other locations were priced between $14-$15/mtCO2e.

Some other locations were priced at bigger discount. The afforestation/reforestation credits from China were at a $4.00/mtCO2e discount to global prices, Platts reported earlier.

Most forestry projects developed in the US end up being certified by the ACR or the Climate Action Reserve (CAR). American developers prefer American registries, while VCS was a popular standard for other global credits, a source said.

"Locally based afforestation projects in the US are generally much more expensive than in other countries," a source said. "I think it comes with the 'Buy American' kind of mentality."

Another source said that afforestation/reforestation credits are more expensive not only in the US, but also in many other developed countries, such as Spain, because these projects carry high development costs.

Buyers' preference to purchase credits closer to their locations also influenced prices.

A European buyer might be more interested in Spanish afforestation, as the project will be closely located, making it easier to evaluate the impact on the local community, according to the source. That, in turn, pushes up prices.

"I am seeing some really high prices for forestry from US and Spain," the third source said.

Platts reported ACR/CAR certified afforestation credits offered at $19.00/mtCO2e of vintage 2018+, Nov. 25. Afforestation/reforestation credits comprise a significant chunk of credits in the nature-based removals category.

US afforestation/reforestation credits from several project IDs (499, 459 and 386) of 2018+ vintage were offered at $19.00/mtCO2e Nov. 23, with volumes ranging from 4,000-7,000, Platts reported earlier. A CAR project of ID 683 was offered at the same price for a similar vintage, but with volumes over 100,000.