The voluntary carbon credit market could experience another quiet quarter if corporate spending on social responsibility does not pick up.
Traditionally, the second quarter is stronger than the first but the voluntary market has suffered in the past year from the economic downturn as corporates cut spending on social responsibility.
The market relies on businesses to self-regulate their carbon emissions in the absence of a legally-binding climate pact and individual consumers wanting to offset their carbon footprints from, say, international air travel.
The market has started the second quarter in a “steady” but “unspectacular” way, according to brokers MF Global.
Buying activity was slow in the first quarter as buyers favored very specific types of offset projects.
Market players said this trend could continue into the second quarter, picking up slightly if corporate social responsibility spending increases.
On the plus side, the market is still stronger than it was six months ago. “We see more interest in bids and offers and comparatively speaking it is a bit brighter, there is more chatter,” said Grattan MacGiffin at brokers MFGlobal.
Small-size voluntary carbon unit transactions are still the most frequent and pre-CDM (Clean Development Mechanism) credits are the most popular offsets, the brokerage said.
COMPROMISE BILL
Any positive movement toward a U.S. cap-and-trade scheme could give the market a much-needed boost.
Early next week, three U.S. senators — John Kerry, Lindsay Graham and Joe Lieberman — are expected to publish a climate bill to submit to the Senate which aims to cut U.S. emissions by 17 percent from 2005 levels by 2020.
The bill could give an indication on how many offsets could be imported under a U.S. emissions trading scheme.
“Everyone seems to agree there will be a market in the States and there will be room for offsets,” MacGiffin said. “Speculators are waiting for a fair indication of what a future market could look like. That could be enough for them to get started in this market.”
In other news, Green Exchange Venture and Trayport announced on Thursday a new interface which will give Trayport users direct trading access to environmental futures and options contracts when they have been migrated to Green Exchange LLC.
“This new agreement with Green Exchange Venture will see additional U.S. and EU carbon allowance futures available on our platform,” said Elliott Piggott, managing director of Trayport, which provides software for exchanges worldwide.
Latin America’s first auction of voluntary carbon credits ended in Brazil last week without a single bid, a sign that voluntary markets may struggle to attract interest in the region.
However, successful auctions are sometimes difficult to operate in the voluntary market because it is quite illiquid and buyers are very specific about the type of credits they require.
Dutch carbon emissions exchange Climex will hold a reverse auction of 40,000 voluntary carbon credits at an unspecified date in May.
The Dutch arm of a major accountancy firm is looking to buy the credits which should meet the Voluntary Carbon Standard and be generated by renewable energy projects, Climex said last week.
