Offset developers split on price transparency

Developers of projects to offset carbon emissions disagree on whether price transparency will be helpful for scaling the voluntary carbon market.

While price certainty is key to support new investments in the sector, there may not be as much need for standardization or transparency according to some developers who spoke at the North American Carbon World virtual conference this week.

A standardized homogenous commodity price may not necessarily be desirable, said Derek Six, chief business officer of offset project developer and broker ClimeCo, since voluntary buyers are just that: voluntary. To Six, price transparency is not useful in the voluntary market.

"Voluntary buyers aren't necessarily looking for a homogenous product," he said. "They want something that stands out and messages as being aligned with their operations and their values."

"I think if you try to homogenize the market too much, you risk disadvantaging some of the really great projects that are out there that have phenomenal co-benefits."

If buyers are trying to meet a certain standard then pricing transparency is valuable, but it's also already available in markets such as the CBL Exchange, Six said.

But not all developers share this view.

Transparency is key for scaling the market since prices vary significantly between projects, said Sean Carney, president of offset developer Finite Carbon. Building trust with landowners generating credits is also more difficult when pricing information is not widely available, he said.

"It's not fair, it's not equitable, it's imbalanced information and I think that's good for people making money in the middle, but it's not good for getting more money down to where it's actually making a difference on the ground," Carney said.

The voluntary market also needs to mature more as it is currently in a pre-compliance regime, said Randy Lack, founder of environmental commodities trader Element Markets.

The market is for now being driven more by environmental and social concerns — with a bellwether moment being investment firm BlackRock pushing sustainability within its portfolio, he said. The market will likely converge into a regulatory framework at some point similar to the renewable energy credit market, he said.

As the market matures, price certainty will be able to support new project investments across many project types, Lack said.

"If you want real capital, which we need in order to meet the 2030 and 2050 timelines that we have, you have to have a clear pricing signal that gives confidence for return on that capital from private investors, private equity and private business," Lack said.

By Julia Martinez