INTERVIEW: CAD Trust drives data consolidation to improve carbon market transparency

CAD Trust, the Singapore-based carbon data hub launched in December, will not include pricing data in a first stage but focus on its core mission of improving transparency in global voluntary carbon markets, Simon Henry, Director of Carbon Market Development with the International Emissions Trading Association (IETA), told S&P Global Commodity Insights in a recent interview.

The metadata platform, jointly launched by IETA, the World Bank, and the government of Singapore, seeks to consolidate data held in separate registries using a common terminology.

"Currently, the registries use different terminologies, often to mean the same thing, but the data fields don't necessarily match up, like [differences] between Verra or Gold Standard. Whereas we are defining a single set of data fields so everything appears in the same table," he said.

Major international registries are likely to complete their connections to the platform in the first quarter of this year, including Verra, Gold Standard, American Carbon Registry and Global Carbon Council, which together cover about 90% of activities in the voluntary carbon market.

Once completed, all the data will be visible on CAD Trust, including the number of credits issued, the number retired, issuance dates, crediting periods, project location and project type.

Also available should be the transaction history, namely how carbon credits have moved between accounts, Henry said.

Pricing and rating

Rating information has not been included yet, but functionality has been established that would allow rating data to be added in future.

"But for pricing data there are additional issues. What we are trying to do is to take the publicly available data and collate it. At the moment, a lot of pricing data is not publicly available," Henry said.

"It's possible in future that [carbon price data] is something the CAD Trust can consider," he said.

"Carbon exchanges would be the obvious place to gather pricing data given that exchanges have that data, and in some cases, they have made that data publicly available already. It's possible that this is a future addition to the platform," he said.

Due diligence

For now, the platform would provide solid support for traders and other carbon market participants in decision making and due diligence, he said.

"For those instances where companies sell carbon-neutral LNG, the CAD Trust should help them find high-quality credits to buy to offset those emissions and it should also provide visibility to everyone else on what credits have been used, under which standard, the volume of credits, ultimately providing visibility on this whole process," Henry said.

The initiative should also aid cross-border carbon trading under Article 6 of the Paris Agreement by identifying carbon credits that are "correspondingly adjusted", he said.

Some governments, such as Singapore's, have required companies to use correspondingly adjusted credits to offset emissions under national carbon tax or compliance emission trading systems.

Home and away

The moratorium on carbon credit exports imposed by several countries, meanwhile, "is a big topic in the market" at the moment, he said, adding that "governments have a task to understand how they can best use carbon markets to meet their requirements."

"Countries like Indonesia are interesting as they have a large forest area. Forestry can play a very important role in meeting climate targets, but that forestry could also bring in incomes to countries through the export of carbon credits. So a country like Indonesia has to balance these requirements domestically and opportunities internationally," he said.

Indonesia announced a halt to carbon credit exports last year, while similar measures have emerged in Papua New Guinea and Honduras.

Platts assessed nature-based carbon credit at $4.65/mtCO2e on Jan. 3, S&P Global Commodity Insights data showed.

Shifting focus

While the CAD Trust's short-term focus would be on voluntary carbon market standards, over time this would shift to government activities as programs expanded, Henry said.

The World Bank's Partnership for Market Implementation program supported participating countries to build standardized registries that would immediately be compatible with the CAD Trust platform.

"We [IETA] also have this initiative called the Business Partnership for Market Implementation, which is helping businesses prepare for carbon pricing. I think governments are prepared to implement carbon pricing if the private sector is prepared themselves," he said.

The CAD Trust Council, which determines the platform's strategic direction and future operations, consists of national representatives from Bhutan, Chile, Japan, Senegal, Singapore and the UK.

IETA has also involved other Asia-Pacific region countries in CAD Trust-related consultations.

On governance, one of the big questions on setting up the initiative was whether the platform should be open to any standard and any country to share data.

"The view of the people we consulted with was that the value of the platform was in its breadth," Henry said.

"You try and pull as much data as possible into the platform. You allow access to everyone. And then if the platform is well labeled and people understand what the data show, they can make their own assessments on what's of higher quality, and what's of lower quality," he said.