OPIS launches GHG, carbon offset price service

OPIS launched a daily pricing service for voluntary carbon markets on 28 December.

"The OPIS Global Carbon Offsets Report advances the global initiative to reduce greenhouse gas emissions, meeting demand for transparent benchmark pricing for voluntary carbon credits…in a market primed to grow exponentially by 2030," Fred Rozell, president, OPIS by IHS Markit, said in a statement.

(See this link for sample.)

For the countries and corporations that have committed to net-zero carbon emissions, the OPIS report furnishes price signals to the industry, Rozell said, "enabling developers of nature-based [carbon offset] projects to secure financing, which is paramount for the markets to scale."

One of the new voluntary carbon credits OPIS is tracking is Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). "So far, 88 states have volunteered to participate in the CORSIA offsets in 2021," said Lisa Street, associate director, OPIS. "OPIS benchmarks for CORSIA-eligible offsets send a trustworthy price signal to the aviation industry for voluntary carbon credits that can be surrendered to meet program requirements."

Global Carbon Offsets Report includes 27 daily physical assessments for voluntary carbon offset credits and 10 daily physical assessments for compliance offsets produced by nature-based projects, including:

• Reducing Emissions from Deforestation and Forest Degradation (OPIS REDD+)
• California Carbon Offsets (OPIS CCO)
• CCO with a Direct Environmental Benefit in the State (OPIS DEBS CCO)

OPIS has experience in pricing assessments for low carbon markets, Street added. It is benchmarked by the California transportation fuels industry for the state's Cap-and-Trade and Low Carbon Fuel Standard compliance programs. Also, OPIS has been conducting assessments for California Carbon Allowances and Regional Greenhouse Gas Initiative Allowances, which underlie the IHS Markit Global Carbon Index that serves as a benchmark to the KFA Global Carbon ETF launched on the New York Stock Exchange in 2020.

Acceleration of interest

The use of carbon credits is growing, especially in Europe, where the price of a credit in the EU Emissions Trading Scheme closed at a record €33.44/ton (US$40.91/ton) on 28 December 2020. Compared with the start of 2020, the price of a European credit increased by 30% during the course of the year.

China, the world's largest greenhouse gas emitter, by far, has promised to launch an emissions credit and trading program in 2021.

While the EU's program is mandatory, it began as a voluntary program in 2005, as have others across the globe. Stakeholders in the sector, such as the more than 50 organizations that formed the Task Force on Scaling Voluntary Markets last year, believe that rapid expansion of voluntary trading can move the world toward lower emissions more quickly than governments can act.

In a report issued in September 2020, the task force said current trading of emissions credits, estimated at $300 billion per year, could increase 15 times or more. Its "blueprint" is due to be released on 26 January 2021.

Also indicating the growing interest in carbon credits and trading, AirCarbon Exchange said on 29 December that more than 50 companies have committed to join its blockchain platform for tracking and trading carbon offset credits. "We are seeing a lot of activity from hedge funds and financial intermediaries," said William Pazos, chief operating officer of AirCarbon Exchange.

To date, CORSIA-eligible, REDD+, and cookstoves credits were taking up most of the open interest on the AirCarbon platform, he said, but the expansion of companies will likely broaden the credits that are held and tracked. "As we move towards a carbon constrained economy, financial investors will take a larger share of the overall market; as is the case in most commodity markets," Pazos said.

Includes reporting by OPIS editors Beth Heinsohn and Nandita Lal.

Posted 05 January 2021 by Kevin Adler, Editor, Energy and Natural Resources Group, IHS Markit