New carbon rules may wipe out investor value, warns $220B firm
New standards for the global carbon offsets market threaten to wipe out “a lot” of value for investors, according to Lombard Odier.
In an attempt to improve the quality of the $1.3 billion market for offsets, the Integrity Council for the Voluntary Carbon Market’s new guidelines require projects to include 40 years of emissions monitoring and reporting, to ensure the credits continue to work as designed.
“A lot of existing methodologies or existing credits don’t meet that requirement,” said Lorenzo Bernasconi, head of carbon solutions at Lombard Odier Investment Managers. Those that don’t “will be trading at a much lower price, if not be stranded altogether.”
Concerns about junk credits — offsets that don’t deliver the promised emissions-removing or avoiding benefits — are shaking faith in the market. Buyers retired 11% fewer credits this year through August, compared with the same period in 2022, according to BloombergNEF. The world’s largest trader of carbon-removal credits, Trafigura Group, recently took steps to shield clients from credits linked to a discredited forestry project.
Released in July, the ICVCM’s new criteria has already been adopted by Verra, one of the biggest carbon offsets registries, joining the American Carbon Registry and Climate Action Reserve in imposing the 40-year monitoring requirement. If more registries follow suit, it would risk stranding legacy assets, Bernasconi said.
Verra said in an email that “many projects” already meet or exceed the new standard, adding that projects can also be updated to comply. Rival Gold Standard hasn’t conducted a review, but “we believe that most of our projects have a crediting period of over 40 years,” the company said in an email.
Estimates by Trove
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