Forest Carbon Cheat Sheet: The Numbers

2009 was a rough year across the board, but Ecosystem Marketplace’s State of the Forest Carbon Markets showed that companies that rescue and restore forests to earn money by capturing carbon in trees likely expanded their operations despite the gloom.   In response to reader demand, we’ve distilled the critical numbers from that report into a few hundred words (and digits).

1 March 2010 | It’s been six weeks since Ecosystem Marketplace published State of the Forest Carbon Markets 2009: Taking Root & Branching Out, the first-ever survey of the global marketplace for carbon offsets that reduce greenhouse gas emissions by promoting more efficient land-use.  

Since then, coverage of these fascinating markets has gone mainstream in a big way – in part because the Copenhagen Accord reflected a consensus on the need to develop financing mechanisms for reducing emissions from deforestation and degradation (REDD) as well as for projects that enhance forest carbon stocks, promote conservation and support sustainable forest management (REDD+).

Just over a week ago, Ecosystem Marketplace re-launched the Forest Carbon Portal (FCP), sparking more requests for a condensed summary of the report’s findings.   In response to this demand, Ecosystem Marketplace has compiled highlights from the report, plus some never before seen data from 2008 and 2009:

Visit the Forest Carbon Portal to listen to a podcast of the January 14 launch of the report at the offices of Baker & McKenzie in Washington, DC, and to access the power point slides of the launch of the report .

Global Forest Carbon Markets Accross Time

• Historically and across markets forest carbon credits transacted a total of 20.8 MtCO2. Volumes transacted in 2008 and the first two quarters of 2009 were 5.3 MtCO2 and 3.7 MtCO2 respectively.
• Markets for forest carbon credits, include the Clean Development Mechanism (CDM), New Zealand Emissions Trading Scheme (NZ ETS), Chicago Climate Exchange (CCX), and Voluntary “over the counter” market.
• Prices ranged from $0.65-$50 and the overall volume weighted price was $7.88/tCO2.
• Compliance markets fetched the highest volume weighted price average at $10.24, the voluntary OTC came in second at $8.44, CDM tCERs commanded $4.76 and CCX credits sold for $3.03. In both 2008 and the first two quarters of 2009 the volume weighted average price across all markets was approximately $6.10.
• The total historical market value through the first half of 2009 was $149.2 million, of which $137.6 million arose from the voluntary market. In 2008, the market was worth $37.1 million
• The most common drivers of deforestation and degradation were logging, agriculture, small scale subsistence activities including grazing and fuel wood collection.
• North America (39%) and Latin America (22%) were the source of most transactions. Oceania followed with 16% of volume transacted. Africa was the home of 11% of transactions, with Asia and Europe the origin of 6% and 4% respectively.
• Afforestation/Reforestation (A/R) projects transacted the highest credit volumes, selling 63% of total volume.

Voluntary OTC Forest Carbon Market

• Historically, the voluntary “over the counter” (OTC) market for forest offset credits dominated forest carbon markets, transacting 73.4% of credits (15.3 MtCO2).
• Of the total number of credits transacted respondents reported 6.1 million tonnes that were retired.
• In the voluntary OTC forest carbon market we identified 54% of suppliers as non profit organizations, 39% as for profit organizations and 6% belonging to the public sector. The private sector made up nearly half the market value at $54.5 million due to a higher volume weighted average price of $10.21/tCO2 than the non profit sector at $7.07. Non profit sector sales equated to $49.2 million and public sector trades were worth $8.1 million.
• Overall 86% of reported credits were verified to a third-party or internal standard.
• Of the 70% of credits utilizing third-party standards over time, the top utilized standard was the Climate, Community and Biodiversity (CCB), followed by the Voluntary Carbon Standard (VCS). Credits from projects utilizing a combination of these two standards or those with just the VCS certification sold in the range of $2-$22 with a median price of $8.44.
• Projects with Climate Action Reserve (CAR) certification commanded prices in the range of $8.44-$15.36.
• About 76% of projects were planted with “mostly indigenous” species and generated 82% of credits sold.
• The largest number (4.9 MtCO2 or 36.8%) of transacted credits were reported from government-managed land, almost a quarter (22%) of which were generated on state-managed protected areas in 2008. Another 27.8% (3.7 MtCO2) of credit volume sold came from land involving collective or customary rights. About 22% (2.9 MtCO2) of all credits over time come from privately owned land.
• About 38% (5.1 MtCO2) of transacted offsets came from North America, 23% (3.1 MtCO2) from Latin America and 15% (2.0 MtCO2) from Africa. In terms of transaction value over time, Latin America takes the top prize with $29.6 million at a volume weighted average price of $9.59/ tCO2, followed by North America ($26.2 million at $5.13/tCO2) and Africa ($20.9 million at $10.38/tCO2).

Reducing Emissions from Deforestation and Degradation (REDD)

• All REDD transactions occurred in the voluntary carbon market.
• The 11 REDD projects reporting transactions in the OTC voluntary carbon market comprised just 5% of the total number of projects but accounted for 24% of the volume transacted, selling 3.1 MtCO2 to date and generating $41.6 million.
• The majority of REDD credits (1.6 MtCO2) were transacted prior to 2002.
• REDD credits were valued higher than the other forest carbon project types we tracked (A/R, improved forest management and mixed project types) selling at a volume weighted price average at $13.33/tCO2.
• REDD prices hit a high of $17/tCO2 in 2006 and have since experienced a downturn. The weighted average price was $11.43/tCO2 in 2008 and $9.43/tCO2 in the first half of 2009.
• In total, respondents reported REDD projects covering 1,122,940 hectares, more than half of the total hectares influenced by carbon finance.

Highlights from Africa, Asia, Latin America and North America

Volumes Transacted in the Global Markets Historically and in 2008

• In Africa, we tracked 15 forestry projects actively selling carbon-offsets historically for a total of 2.0 MtCO₂. More than 86% of the region’s forest carbon offset transactions occurred after 2006, with the total volume jumping from 51,910 tCO₂ in 2006 to 458,627 tCO₂ in 2007 and more than doubling to 1.1 MtCO₂ in 2008.
• Asia transacted 957,227MtCO₂ historically, or 7% of the world’s forestry-based offsets from 11 forestry projects. In 2008, the region sold 153,697 tCO_2.
• Historically, Latin America sold 3.9  MtCO₂ of credits, accounting for 22% of all market transactions coming from 19 projects. Over half (53%) of Latin America’s forestry-based offsets were transacted prior to 2002, and these offsets accounted for a staggering 70% of all forestry offsets worldwide in that period. In 2008, Latin America transacted .9 MtCO_2.
• 24 projects in the United States sold approximately 6.2 MtCO₂ overall. In 2008, the US transacted 1.65 MtCO_2.
  

Prices and Values

• Across markets, the volume weighted average price for African forestry credits ($10.38/tCO₂ worth $20.9 million) is the second highest regional average, with Oceania taking the lead at $12.97. In 2008 credits sold for $9.28 and were worth half the historical value in just that year at $10.6 million. In the first half of 2009, they transacted at $11.06/tCO2 and the total value was $1.45 million.
• Asia follows close behind at $9.91/tCO₂ but due to the low volume of credits sold offsets originating from the area were worth only $9.9 million. In 2008 credits sold for $7.02 and were valued at $1.1 million. By mid 2009, the average credit price was $7.85/tCO2 and credits amount to $.76 million.  
• In terms of transaction value over time, Latin America takes the top prize with $29.6 million at a volume-weighted average price of $9.59/tCO2. In 2008 the credits sold for $5.48/tCO₂ and were worth $4.3 million. In the first half of 2009 its price had increased to $11.48/tCO2.
• North American credits were valued at $4.47/tCO₂ over time and reached a total worth of nearly $32 million. In 2008, credits sold for $4.69/t and by the first half the price per credit decreased to $3.81. In 2008 the market for US credits was worth $8.7 million and by mid 2009, the market was worth this exact amount.
  

Hectares Influences by Carbon Finance

• Africa as a region reported the largest land area (in hectares) influenced by carbon finance (795,015 hectares). Latin America came in second (669,952 hectares) followed by Asia (196,744 hectares), with North America at the opposite end of the spectrum (32,917 hectares).

Maria Bendana manages the  Forest Carbon Portal, a project of Ecosystem Marketplace.

For more questions on the report, please contact [email protected].

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