VCM sees bumper retirements in December with 2.6 times rise on month

Bumper retirements in the nature-based avoidance and renewable energy segments led to a sharp jump in total retirements in the voluntary carbon markets in December, as per the data from S&P Global Commodity Insights analytics.

December has seen historically higher retirements as people retire credits to adjust their account books, an India-based broker said. All the categories of carbon credits rose in retirements in the month.

The nature-based avoidance segment saw the highest number of retirements at 16.7 million in the month, even as the segment struggles with credibility and quality concerns. Retirements in the segment jumped by 116% on the month and 93% on the year.

Beneficiary data published on the Verra registry highlighted that around 4 million mt credits were retired by oil major Shell, which accounted for around 11% of total retirements in the month, while around 4% each was retired by the Volkswagen Group and Geopost, an international parcel delivery company.

Renewable energy credits were the second most retired at 10.16 million mt, with a 135% jump on the month and 6% rise on the year. Despite the jump in retirements, the prices continued to reel under pressure in the segment, indicating that retired credits were bought earlier.

Platts Renewable Energy current year assessment shed 10% in December and was assessed at $1.8/mtCO2e on the last trading day of the month, with prices for both GS as well VCS certified credits falling amid low demand.

Historically there is increased activity in December as people buy carbon credits to meet their year-end requirements, which was not the case in 2023, an India-based trader/developer said referring to renewable energy credits.

Industrial Pollutants saw the third highest increase in retirements. Compared to December 2022 and November 2023, the jump in December was nearly 23 times on the year and of 22 times on the month.

Natural Carbon Capture credits retirement rose 34% on the year and 205% on the month as demand for nature-based removal credits has been increasing, especially in the primary markets, amid preference for high quality credits.

Household Devices segment, which has also been struggling amid high supply and fraction of non-renewable biomass issues, fell 30% on the year to 2.1 million retirements. However, the segment saw a sharp 9 times monthly jump, which may prove helpful in reducing the supply-demand gap in the segment.

After a report earlier this year stated that registries have over-credited the cookstoves credits, the segment has seen a sharp drop in activity and price levels.

Total retirements in December from household devices, industrial pollutants, methane collection, natural carbon capture, nature-based avoidance and renewable energy were at 36.96 million mt, up 162% on the month and 51% on the year.

Issuances

Cumulative issuances of household devices, industrial pollutants, methane collection, natural carbon capture, nature-based avoidance and renewable energy rose to 23.53 million mt, 5% up on the month. However, compared to December 2022, the issuances from these categories dropped by 49%.

Household devices were the most issued credits in December at 6.62 million mt, up 14% on the year but down 6% on the month.

Renewable energy, followed by industrial pollutants, were the second and third most issued categories, at 5.71 million mt and 4.1 million mt, respectively.

Issuances for nature-based avoidance credits stood at 3.12 million mt, dropping 56% on the year and 13% on the month.

Performance in 2023

The total retirements of household devices, industrial pollutants, methane collection, natural carbon capture, nature-based avoidance and renewable energy and tech carbon capture in 2023 were higher than 2022 levels by 8% at 162.57 million mt, led by bumper rise in December.

Issuances from the same categories, however, dropped by 11% on the year to 256.8 million mt. The fall in issuances was due to a 30% drop in renewable energy issuances and a 25% fall in nature-based avoidance issuances on the year.

Renewable energy was the most retired and issued category of 2023, with 62 million mt retirements and 80.68 million issuances in the year.

Nature-based avoidance was the second most retired and issued category, with 54.35 million mt retirements and 59.05 million mt issuances in the year.