COMMODITIES 2025: Nature-based avoidance prices to remain steady, despite expected increase in demand

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The demand for carbon credits is expected to rise in 2025, yet REDD+ prices are expected to remain stagnant amid ongoing scrutiny and the adoption of new REDD+ methodologies. Yet the decision of the Integrity Council for the Voluntary Market (ICVMC) to include REDD+ methodologies is expected to influence market dynamics.

"Nature-based avoidance projects are key to conserve carbon sinks all over the world and have a special importance for the conservation of the Amazonian region," a Brazil-based carbon markets expert said to Platts.

The Nature-based avoidance carbon credits are associated with projects aimed at reducing emissions from deforestation and forest degradation, focusing on sustainable forest management, conservation, and improved agricultural practices.

Growing interest in nature-based solutions

A Mexico-based climate finance expert said, "There is a growing interest in nature-based solutions among corporates and financial sectors." They noted that the emergence of the TNFD (Taskforce on Nature-related Financial Disclosures) indicates a shift in corporate strategies toward sustainability, recognizing environmental impacts beyond emissions.

A second Brazil-based developer stated, "Prices are on track for improvement in the REDD+ segment," emphasizing that ratings will be crucial for enhancing market liquidity. "High ratings are a key driver of liquidity for REDD+; poor ratings can kill it," the source added.

A Peru-based developer said: "There will be a lot of battling with credit rating agencies," highlighting the importance of maintaining integrity standards to ensure that projects are recognized positively.

Future outlook for 2025

Market expectations for 2025 hold that overall demand for carbon credits is expected to rise, though REDD+ prices may not follow suit. A Colombia-based trader said, "Whether labeled or not, [prices will] remain similar; the type and location of the project is more influential on pricing than the label itself." The trader added that increased demand could lead to sales of existing credits, but higher prices are unlikely.

Instead, the trader suggested that if clients seek to pay more, they will choose different types of projects, indicating that overall market dynamics will determine price movements rather than the CCP label.

The first Brazil-based developer expected REDD+ prices to remain below $5/mtCO2e. The developer argued that those who invest time and resources into creating compliant projects should not be priced the same as projects with less integrity. And added, "I thought that the sale made by Pará gave us a good floor [for pricing carbon markets], but months later we still can't find buyers willing to pay between $12-15/mtCO2e."

ICVCM's impact on REDD+ prices

The same source commented, "Overall, the movement of public policies surrounding the carbon markets is good news," and added thatwith the approval of REDD+ methodologies by the ICVCM, corporates will feel more at ease investing in the REDD+ segment.

However, they expressed concern that all non-CCP projects may be pushed out of the market despite their integrity and emission reduction capabilities and that adoption of new methodologies will increase investment costs for developers.

A Peru-based developer noted that the newly approved CCP label could improve credibility and demand for REDD+ credits in Latin America. The developer emphasized that the label's effect will hinge on effective ground-level implementation, especially for initiatives facing verification challenges.

During November and December 2024, the market showed slow upward stability with prices within $4.20-$4.65/mtCO2e, rebounding post-COP at Baku, as sentiment improved after three REDD+ methodologies received CCP labels. However, there are mixed reactions on the CCP labels.

"I think the projects that will get CCP label will be higher than the traditional projects," a Canada-based trader said to Platts on Dec. 19, "I don't have any hope for traditional projects not on new methodologies getting any price increase".

A Colombia-based trader noted the CCP's label approval has not significantly affected demand of REDD+ projects, which continue to see low prices. The trader said, "It is too soon to assess [REDD+ price] changes; the CCP label may enhance credibility, [but] it has not led to price or demand increases for other types of CCP-labeled credits, such as landfill gas."

"There is still uncertainty regarding future prices of carbon credits in general, not only for the REDD+ segment," the Mexico-based climate finance expert said. "There are still many important questions on the supply side," including "what prices they will have" and "what technologies will be implemented."

The Platts Nature-based Avoidance Current Year price hit a low of $2.75/mtCO2e by Jan. 31, 2024, following a series of slow price declines, parallel to the Integrity Council for the Voluntary Carbon Markets (ICVCM) decision to assess carbon credit methodologies for adherence to Core Carbon Principles. This drop came after Verra's announcement on Nov. 21 that none of their REDD+ methodologies would be submitted for assessment.

In 2024, the Platts Nature-based Avoidance Current year price increased 32% closing the year at $4.65/mtCO2e on Dec. 23 compared with $3.50/mtCO2e on Jan. 2, 2024.