Quality and pricing indicators that track carbon market impact

Retirements continued their slow integrity improvement in July, the first month of Q3. The retirement index continues to be weighed down by use of REDD and large-scale renewable energy projects – credits that are explicitly not ICVCM CCP eligible and also exhibit lower quality among Calyx Global ratings.

By contrast, issuance quality is improving at a faster pace. Of the top 10 projects with the most issuance, many are in categories that tend to have higher quality such as landfill gas and biodigesters. However, there are also many credits in the afforestation/reforestation (AR) category that are poor quality – suggesting that buyers are drawn to removals regardless of quality. The issuance index would be higher if buyers paid attention to the quality of AR projects.

• In July, VCM credit prices experienced mixed movements, though within a narrow range. Tier 1 (T1) credits recorded the highest average price increase at 5.5% month-over-month, while Tier 3 (T3) credits also posted a gain of 2.3%. In contrast, Tier 2 (T2) credits saw a marginal decline of 0.3%. The price premium between T1 and T3 credits widened over the month, with T1 credits averaging 66% higher than T3 prices.
  
  
• The appreciation in T1 prices was primarily driven by rising prices for Landfill Gas, Leak Detection and Repair, and Ozone-Depleting Substance Destruction projects, all of which are developed using ICVCM CCP-approved methodologies. Market participants continued to assign price premiums to credits carrying this label. The average price increase in T3 credits was largely due to rebounds in REDD and Avoided Deforestation project prices, which constitute a significant portion of the T3 category.