Methodology Trends 2024

2024 has seen some notable changes in tastes from both a retirement and speculative perspective in the physical voluntary carbon market.

Media scrutiny in 2023 prompted certain entities to distance themselves from REDD+ methodologies, casting doubts on aspects such as additionality, baselines, and permanence from a carbon accounting standpoint. Concurrently, co-benefits and occasional human rights concerns led to the suspension of select projects. Nevertheless, several REDD+ initiatives have withstood rigorous analysis and remain in high demand, commanding premiums in the market, exemplified by projects like Katingan and Rimba Raya projects. Jurisdictional REDD+ initiatives have also addressed some of these challenges, underscoring the importance of careful project selection through due diligence or engagement with knowledgeable counterparts. JREDD will be an interesting sector to watch over the next few years given its eligibility into Corsia phase 1.

Despite the emphasis on quality, the retirement rates of lower-priced REDD+ projects remained robust in 2023. In tandem with the pursuit of superior quality units, significant retiring accounts sought bargains to diversify their carbon portfolios, acquiring larger volumes of scrutinized projects at discounted rates compared to previous years.

Similarly, cookstove methodologies encountered scrutiny at the beginning of the year, particularly regarding adoption and maintenance within communities. While cookstove methodologies offer strong carbon benefits, ensuring their continued use necessitates diligent monitoring and maintenance. Media attention should be seen to serve as a catalyst for improved practices and project quality.

Overall, the market has seen a push towards quality, even such that specific projects can trade at a premium to others within that same methodology. Scarcity has been another cause of such premium, simply due to a lack of units available within the secondary market for certain projects. Examples of such projects are VCS 2512 Colombia ARR and VCS 1899 Indonesia ARR. Despite these projects still have reasonable tonnage outstanding, these volumes have simply not hit the secondary market. As a result, these projects are trading around 6.00+ USD premium to similar nature-based removal projects.

Finally, the market witnessed a surge in demand for projects speculatively aligned with core carbon principles (CCPs), with certain methodologies gaining traction over others, notably those targeting methane and other gas emissions and chemicals harmful to the ozone layer. Such methodologies offer simpler carbon accounting compared to nature-based projects, mitigating challenges related to baselines, additionality, and permanence, albeit with fewer co-benefits. CBL launched their CCP standardised instrument in July 24, for which Valitera supported with two transactions. The CCPs remain a push in the right direction for the VCM, providing better clarity and confidence in the underlying units. Speak to Valitera to discuss CCP trends and available supply.

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