Verra’s revised fees for carbon credits squeezes profits for traders, developers

An increase in the fee structure by the Verra carbon registry has left project developers and traders struggling to turn a profit, particularly from renewable energy credits, according to market participants.

In October 2024, Verra -- the largest certifier of voluntary carbon offsets by issuance -- announced a revised fee schedule for registration of carbon projects, credit issuance, and services like transfers, retirements and cancellations. While the first major set of changes took effect on Dec. 1, 2024, the new fee structure is being rolled out in phases.

In the carbon credit lifecycle, a project developer typically sells credits to a broker or trader at a price that covers development costs, including validation and verification expenses. While validation fees are one-time charges, verification fees are incurred each time an issuance occurs.

The hike in fees has impacted the voluntary carbon market as a whole, but the renewable energy segment -- already grappling with integrity issues with credit prices -- has been the worst hit. Prices for Verra credits are now languishing below $1/mtCO2e. The changes have further undermined the viability of renewable energy projects.

Platts assessed the renewable energy price at $1.05/mtCO2e, which is referenced to Gold Standard certified credits with a 2022 vintage sourced from India, while Verra-certified credits were last heard indicatively valued at 55-60 cents/mtCO2e.

Platts assessed the Renewable Energy current year price on March 18 at $1.05/mtCO2e.

With the introduction of the transfer fee and hike in issuance fee, there is not much room left for negotiation, according to Payal Saha, Senior Carbon Market Professional at ReNew, one of Asia's leading carbon project developers.

Out of the many revisions, the most pertinent concern is the introduction of a new fee of 2 cents/unit for the transfer, retirement and cancellation of credits. In addition, the issuance fees charged when a project requests credit issuance have increased by 3 cents, now standing at 23 cents/unit.

A carbon credit usually changes hands among intermediaries 4-5 times, with each transfer incurring a 2 cent fee per unit. Finally, when the credit is sold to a buyer for emissions offset, the retirement or cancellation of the credit also incurs a 2 cent fee, which the retiree bears.

Furthermore, according to Verra's website, for each verification review, a developer must pay an upfront fee of $5,000, which includes $2,500 as the fee itself. The remainder is credited against future issuances.

"The $2,500 cost for the verification process is an additional cost for us beyond the 23 cent issuance fee," Saha said. "The cost of carrying credit inventory is increasing as renewable energy credits are mostly sold in spot, not in forward. Hence, there is a time lag of 6-12 months for developers to recover the costs incurred."

In addition, if a project wants its carbon credits to be labeled as Article 6 credits under the Paris Agreement, a 5 cent/unit fee is imposed.

Renewable energy credits price worst-hit

The revision of the fee structure has compounded the challenges in the renewable energy segment, which has been struggling with an oversupply of credits.

Since Platts first started assessing RE credits in 2021, the price has fallen by 54.3%. The Platts Renewable Energy current year price hit an all-time high of $7.65/mtCO2e on Jan. 19, 2022.

In comparison, the decline in other avoidance credits has not been as large as for renewable energy credits. The Platts Household Devices current-year price has fallen 47.8% since it was first assessed in 2021 while the Platts Methane Collection current-year price has shed 9.3% since 2021 and the Platts Nature-based Avoidance current-year price has lost 29.2%.

"There's a lot of uncertainty in this market," an India-based trader explained. "Pricing has been distorted due to the hike in issuance and transfer fees. If the fee increase were limited to retirements, it wouldn't have been such an issue."

Since the implementation of the new fees in early 2025, profitability for trading firms has diminished.

"Buyers have been quoting as low as 25-30 cents for renewable energy credits, which doesn't make sense for anyone trading or developing projects in this market," another India-based developer said.

To break even on development costs, VCS-certified wind/solar credits need to fetch 50-60 cents/mtCO2e; sources told Platts. "Considering the change in fee structure... buyers and developers will have to bear up to 4-5 cents of transfer and retirement fees additionally," Saha said.

Several market participants noted that sellers are desperate to offload large inventories of renewable energy credits. Companies are opting for a tender route in an attempt to sell off low-value credits.

As a result of these pressures, market players are increasingly shifting to more profitable alternatives, such as international renewable energy certificates (I-RECs), where the validation and verification processes are simpler and less expensive. Some buyers are also considering renewable energy carbon credits registered with other registries, such as the Universal Carbon Registry, which keeps up to 4.5% of the total credits issued (depending on issuance amount) for itself as a fee.

Platts last assessed India I-REC wind and solar current-year price at 84 cents/MWh. Platts reported last week that redemption of Indian I-RECs surged 57.1% month over month, signaling strong demand to offset their Scope 2 emissions.