Carbon Market Round Up: April 2023

The Carbon Monthly Series provides a window into pricing movements of key compliance and voluntary markets and broader market trends.

Apple Commits an Additional $200 Million to Nature-based Solutions⁽¹⁾

Apple announced an expansion of its Restore Fund, doubling the company's total commitment to US$400 million. The Restore Fund was launched in 2021 as a partnership with Goldman Sachs and Conservation International with the goal of reducing at least 1 million tCO2e annually through nature-based solutions. As part of the announced expansion, Climate Asset Management – a joint venture of HSBC Asset Management and Pollination – will manage the funds going forward. The three initial investments completed by the Restore Fund are located in Brazil and Paraguay, with the aim of restoring 150,000 acres of sustainability certified working forests, grasslands, and wetlands. The Restore Fund is a part of Apple's roadmap to become carbon neutral across its entire supply chain and product life cycle by 2030.

G7 Statement and the Carbon Management Challenge⁽²⁾

The G7 released a statement on the Principles of High Integrity Carbon Markets. While the document is high level, it is an acknowledgement of the important role that credible carbon markets play in reaching global emissions reduction goals. The statement covered the importance of fostering supply-side, demand-side and market integrity within the voluntary carbon market and gave a nod to independent stakeholder initiatives. The Biden Administration also kicked off a Carbon Management Challenge at the Major Economies Forum ("MEF"), a new initiative to encourage countries to provide announcements at COP 28 that will accelerate CCUS and carbon removal technologies. MEF participants Australia, Canada, Egypt, the European Union, Japan, the Kingdom of Saudi Arabia, the United Arab Emirates, the United States, Norway and Denmark joined in launching the challenge. Notable exceptions are China and India.

Voluntary Carbon Market Initiative Appoints Buyer's Advisory Council⁽³⁾

The Voluntary Carbon Market Initiative ("VCMI") appointed an expert advisory panel ahead of its plans to release a Claims Code of Practice for buyers of carbon offsets. The VCMI published a provisional version of the document in June 2022, and the final version is expected to be launched by the end of June 2023. The newly formed Expert Advisory Group includes experienced environmental market and social policy practitioners from across the globe, as well as Indigenous and community leaders. The VCMI's work runs in parallel to that of the Integrity Council for the Voluntary Carbon Market which recently published its Core Carbon Principles aiming to bolster supply-side integrity.

Record Number of Companies Make Net Zero Commitments⁽⁴⁾

A record number of companies have adopted net zero targets in the first quarter of 2023 with over 340 corporates having signed up to the Science Based Targets Initiative ("SBTi") in line with the 1.5C warming scenario of the Paris Agreement. A total of 780 companies have adopted some form of emissions reduction targets in Q1 2023, bringing the cumulative number to date globally to nearly 4,800. As more corporates begin to set pathways to meet their emissions reduction goals, it can be anticipated that offset use will continue to become mainstream.

EU ETS Market⁽⁵⁾

EUA's fell from a mid-month high of €98.50 as concerns over weaker year-over-year emissions and lower European natural gas prices started to ease demand in the market. The market dropped as low as €85.15 last week before rebounding nearly €4.00 on the back of the announcement that the EU Innovation Fund will not sell additional allowances for the REPowerEU effort before 2024. This would be a delay of an additional 40 million tonnes of market supply that was expected to be released at auction as early as this summer. As a reminder, the European Commission agreed to raise €20 billion from the EU ETS in order to help support the shift away from fossil fuels and reliance on foreign energy imports.

RGGI Market⁽⁶⁾

Prices have remained relatively stable over the past month, hovering in a range of $13.11-$13.55/st after a run up at the end of last month on the back of program review news. The RGGI annual report from the Independent Market Monitor Potomac Economics was recently released and suggested the existing bank of excess credits in the market dwindled significantly throughout 2022 and looks to continue to do so through 2025.

Washington Officials Holding Public Consultation on Plans to Link with WCI⁽⁷⁾

Washington officials announced a public consultation on plans to link its newly formed cap-and-invest market with the WCI, with a finalized decision expected to be made in summer 2023. A linked cap-and-invest program means Washington would conduct joint allowance auctions alongside both California and Quebec. Should Washington elect to link its market, California and Quebec would still need to undergo their own processes to decide whether to link, and all three programs may require regulatory revisions to ensure alignment. Finalization of the linkage would likely not occur until 2025.

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