Gold Standard Supply Report Q2 2016 PDF
Preview Gold Standard Supply Report Q2 2016
GOLD STANDARD Supply Report Q2 2016 Better information for better decision-making INTRODUCTION About this report This report is a response to feedback we received from our Trans- parency Initiative launched in 2015 as a way to increase confi- dence and participation in carbon markets and aims to improve access to market information for planning and decision-making. Published quarterly, the report provides up-to-date issuance and retirement data for Gold Standard emissions reduction projects. It also features information and articles that help build clarity around the complexities of the market, especially in regards to pricing and how it varies from project to project. We hope you find this report insightful and we welcome any com- ments or feedback to help us continue improving. [email protected] fig. 1: Transacted volume, average price and price range by project type, 2015 Figure 8: Transacted Volume, Average Price, and Price Range by Project Type, 2015 CARBON PRICING: 14 20 13 18 Why prices vary by project type? 12 11 16 10 14 e) COe)289 $11.4 $11 12 $/tCO2 Itcmnoovu mtechsphetl ieytnroxga u–n i n ssehi tscoiploiumenlcd ati oatpe laal yay ln aofdnow srd- wcaea evcrreabinlroobgnpo ,wm nc hleciamnretta daptiperto.p sWjeeeacchrtuisslre eti osy w oabou eprr ol adcw a.s eirHmbrofopuwnlle e wp vqraeouyrve, tisidott ei cocraon ncn ao tsnfre i hbegoumuwti ed e Volume (Mt 46357 $3.3 $7.5 $4.9 $3.8 $9.6 $3 $4.1 $5.9 $9.4 $2.9 $3.5 $4.1 $7 $3.1 $4$9.9 46810 Average Price ( you through the process, this series of articles aims to provide some clarity in 2 $1.9 $2 $1.4 2 1 how carbon credits are valued, taking into account the differences among the 0 0 Idpnir sotchjueesc lstases dtt h etahdtei ti isdosinffu eeor fte thnhetis mw r.aeypso rtot> >v awluee a msoocriea l oapcptiovirttiuensi.t ie s for schooling and WindLRaEnDdfDil+l methTarneee plaClnetiann gcooRksuCtln-oevoafe-snri Ivwemra tprheoryvd/repod ufriofriecsEat tnieomrangny aegfBfeiicoimeemnnatcsys -/ iEbinnodecruhsgtayrr iealf-fficoiceunscey d- coBmiomguansity-focuTsreadnsportaFtiuoeln sWOwaiztstocenh ieh-nedgaet prleectionveg rsyubstancesLivesStoolcark methanLearge hydrGoeothermAalgro-forestry carbon credit, whether by using market Source: Ecosystem Marketplace - State of the Voluntary Carbon Market Report 2015 dynamics as a guide, pricing a project Although the sustainable development Volume Average Price Price Range based on its cost or based on the value benefits delivered by wind projects are small-scale projects that contribute the place, carbon credits from wind projects that a project delivers. However, pricing also important, often carbon credits greatest positive impacts, however, based in India (which are in abundance) also varies based on the project type from cookstove projects will sell at a these smaller projects are often more sold at an average of $1.2/tonne com- and can even vary within the same type higher price. This is due to the value expensive to implement and produce pared to those originating from the US, of projects (see figure 1). This article over and beyond carbon that a project fewer carbon credits, making it harder which typically sold for $3.7/tonne. highlights some of the reasons for this delivers, the tangibility of these benefits to reimburse the implementation costs difference, outlining the key factors that and that many investors feel they can unless the credits are sold for higher And finally, the price a buyer is willing should be considered when purchasing make more of a direct impact at a com- prices. to pay can depend on their organisa- carbon credits. munity level. For example, if you look at tion’s objectives and key priority areas. the outcomes from the impact report we Project location can also be a deciding For example, some companies may pay commissioned (see figure 2), you can Value of beyond-carbon benefits factor that affects price. For some coun- more for a project that is closely linked see that although wind projects provide tries it is difficult to implement emission to their supply chain or based in a pri- more value in the balance of payments reduction projects due to a lack of ority region for their Corporate Social While all Gold Standard projects must – i.e. the value created from reducing infrastructure, resources, or because Responsibility (CSR) commitments. deliver impacts in sustainable develop- the amount of fossil fuel imports - the they are considered high risk, such as ment beyond climate security, different additional value it provides is just $21 project types provide different levels those regions that suffer from conflict. Project vintage per tonne of CO2 reduced. Compare However, it is often these regions that of benefits. For example, a large-scale this to cookstove projects that deliver wind project based in Turkey provides benefit the most from the implementa- Another market trend that affects pric- $151 in additional benefits and you can more country level benefits such as tion of climate and development proj- ing is the age of the carbon credits; see that by investing in the same prod- better access to clean technologies, ects. Tools and mechanisms have been that is, when the emission reduction uct (i.e. a carbon credit), you can make local employment opportunities, more developed to help increase the number took place. Gold Standard maintains more of a direct impact on the lives and energy independence and increased of projects in such regions, however, to that – as long as it meets the criteria health of vulnerable communities. This social stability. Whereas an improved make these worthwhile within a carbon of a reputable standard - it shouldn´t greater value normally correlates to a cookstove project based in Rwanda market, credits would need to be sold matter whether the emission reduction higher cost per credit. benefits people at a community level. It at a higher price. happened now or two years ago. In fact, decreases indoor air pollution, improv- because of the urgency of decarbonisa- Size and location of the project ing health predominantly among wom- Also, prices can vary due to the avail- tion and the long-lasting impacts of car- en and children. Less wood is required ability of credits from a particular coun- bon emissions in the atmosphere, one helping to decrease deforestation and The size of the project can be import- try, for instance according to the latest could argue that an emission avoided saving families money, and less time is ant when considering the cost of the State of the Voluntary Carbon Market five years ago is even more crucial. Still, needed for collecting wood providing credit issued. In many cases it’s the Report published by Ecosystem Market- market dynamics sometimes show low- fig. 2: Monetary value of Gold Standard project impacts per ton of reduced CO2 emissions can sometimes benefit from economies organisations to find the right projects of scale when purchasing large quan- to meet their objectives both in price tities of carbon credits in one-go, as and impact. project developers or retailers are able to sell at a discounted price, due to the Transparency in pricing certainty that such a purchase provides to the project. Currently, disclosure of the price you pay for carbon credits is optional. As a And finally, buyers are often willing to result, historical data for prices of cred- pay more for a project if additional ser- its in the voluntary carbon market has vices are provided, such as access to relied primarily on Ecosystem Market- communication assets (e.g. clear project place’s annual State of the Voluntary er prices for an emission reduction with Standard works to ensure that every details and professional project photog- Carbon Market. We believe that more an older vintage. This can be an oppor- dollar invested into a project delivers raphy) or strategies that help an organi- transparency in this market and greater tunity for organisations to purchase less the maximum amount of benefits from sation to successfully communicate the access to data will build confidence and expensive carbon credits with older both a climate and development per- impact they´ve made to their stakehold- enable more money to flow to those vintages from charismatic projects rath- spective. We do this by insisting that ers and clients. projects and people that need it the er than buying cheaper but more recent projects take a participatory approach most. Valuing a project is always somewhat vintages from other standards that lack to design through local stakeholder subjective, based on an organisations the associated sustainable benefits. engagement -- empowering them to ideals, objectives and requirements. Visit our website>> to learn more about maintain and extend the project for Much like the real estate market, being our Climate Finance Transparency Differences in emission reduc- greater impact. Projects must adhere to aware of the value a project delivers, its Initiative. environmental and social safeguards. tion methodologies size, location, age and quality will help Governance is transparent. And out- comes are long-term, consistent and Prices can vary within the same project comparable, providing assurance that type and this can often be related to the everything claimed is real and quan- methodology used for the project. For tifiable. It´s because of this approach example, referring again to Ecosystem fig. 3: How rigour in project design leads to greater impact that we are supported by a Technical Marketplace´s State of the Voluntary Advisory Committee of leading experts Carbon Market Report, offsets from and endorsed by a network of 80+ NGO avoided “unplanned” deforestation Supporters, ensuring that projects certi- GOOD projects (where the drivers of deforesta- fied to Gold Standard are of the highest tion are typically smallholder agriculture GETTING Increased investment quality -- reducing risk for anyone wish- in greater good or illegal logging) earned higher prices ($5.4/tonne, on average) compared to ing to purchase carbon credits. How- BETTER. ever, like anything of quality, this rigour Greater invester avoided “planned” deforestation proj- confidence comes at a price, which is why Gold ects ($1.9/tonne, on average), where the Standard carbon credits are often sold driver of deforestation (typically a large Amplified impact of at a premium compared to other credits benefits landowner or company) has a legal in the market. clearing plan that is then voluntarily Long-term measurement altered. of outcomes Economies of scale and good Good governance and communications Quality of the project transparency There are other factors that are not Environmental and Like with any purchase, a key factor that social safeguards directly related to the project itself, but influences the price is the quality of the can affect the price paid for carbon project. In carbon markets, a project’s Strong design credits. One such example is the num- quality can be assessed through the ber of credits purchased. Larger organ- Local stakeholder standard by which it is certified. Gold engagement isations that have a significant footprint MAKE AN IMPACT With our Gold Standard projects There are a number of different considerations ranging from qual- ity, type, size, and geographical location, when deciding on what projects to invest in and how much they’re worth. The following pages provide just a couple of examples of how our projects are contributing to both climate change and the Sustainable Develop- ment Goals. When you invest in this Kenyan project, you are: • Positively impacting the lives of 300 000 people • Preserving the equivalent of 1200 hectares from deforestation • Significantly reducing the number of people suffering from respiratory illness • Empowering women through community based training • Enabling children to focus more on educational activities Hifadhi – Livelihoods efficient cookstoves project in Kenya Financed by the Livelihoods Carbon Fund and co-developed by Climate Pal and EcoAct, the Hifadhi project was launched in the Embu District to provide a more sustainable cooking solution to households and decrease deforestation. The objective is to equip 60 000 households with clean cookstoves, positively impacting the lives of 300 000 people in rural communities. Project Impacts • Provides clean cooking solutions to 60,000 households • Decreases deforestation and provides seedlings for households to cultivate their own fruit, fuel wood and medicinal trees • Wood use and harmful smoke are reduced by more than 50% • Women and children benefit from improved health and more time + money • Technology is produced locally and subsidized by climate finance, helping the lo- cal economy whilst making it affordable for rural populations • Employs 30 local workers to build the cookstoves • Raises environmental awareness What’s the project worth? • Based on cost and according to Fairtrade, the MINIMUM price should be 8.20€ • Based on value delivered, a credit from a Gold Standard Cookstove project pro- vides $151 in additional benefits beyond carbon GOOD HEALTH GENDER CLIMATE LIFE AND WELL-BEING EQUALITY ACTION ON LAND Electricity generation from mustard crop residues in Tonk, India This project uses mustard crop residue, which is abundantly available in the vicinity of the site, to generate power that is sold to the national grid. The crop residues are supplied by local farmers, generating an additional income for them and their fam- ilies. The electricity generated is exported to the northern regional grid, replacing a mixture of coal and gas based power generation, and thus reducing greenhouse gas emissions. Project Impacts • 227,000 tonnes of CO2 emissions have been avoided • Last year the power plant generated 53 GWh of renewable electricity, avoiding more than 42,000 tonnes of CO2 • 5,000+ farmers benefit from additional income by supplying the power plant with their mustard crop residues every year • 49 permanent and 142 temporary employees work in the power plant • Employees have the opportunity to participate in 33 professional training courses on topics from first aid to sustainable water treatment, whilst making it affordable for rural populations What’s the project worth? • Based on cost and according to Fairtrade, the MINIMUM price should be 8.10€ • Based on value delivered, a credit from a Gold Standard biogas/biomass project provides $41 in additional benefits beyond carbon When you invest in this Indian project, you are: • Avoiding emissions equivalent to taking 48,000 cars AFFORDABLE AND DECENT WORK AND REDUCED CLIMATE off the road for one year CLEAN ENERGY ECONOMIC GROWTH INEQUALITIES ACTION • Diversifying the energy mix for India, helping the transition to a low carbon economy • Enabling 5,000+ vulnerable households to benefit from additional income • Providing much needed job opportunities to nearly 200 people • Helping local communities to benefit from increased knowledge transfer • Enabling children to focus more on educational activi- ties GOLD STANDARD Supply Report This section of the report provides our up-to-date supply data for Q2 2016. For historical data, please refer to previous editions of this report>> The report also provides our project issuance projec- tions for the next three months. GOLD STANDARD OVERALL Issuances + retirements We have 1300+ projects in our pipeline with a potential to save more than 9 billion tonnes of CO2 per year. To date, Gold Standard projects have saved nearly 59 million tonnes of CO2 from being released into the atmosphere – the equivalent of driving around the world 5.7 million times in a car. Figure 1 provides an insight into the total supply and demand for Gold Standard Verified Emission Reductions (VERs). Just over half of our total issued VER credits have been retired. Fig. 4 27 million GS VERs retired in total 51 million GS VERs issued in total Q2 2016 issuances + retirements Table 1 shows how many emission reductions were issued this quarter compared to Q1 2016. Q2 2016 In total, 45 projects issued nearly 4.7 million carbon credits or validated A/R certificates in Q2 2016. The table also shows the VER retirements for the same period. Retirements ranged from corporations such as Eneco, Microsoft Corporation, Marks & Spencer, COOP and World Bank. It Issuances + retirements also included Sustainable Brands Conference Istanbul 2016 and the new cool effects website>> which aims to simplify the process for reducing carbon pollution. Figure 5 shows the supply and demand for Gold Standard VERs for Q2 2016. While Table 1 more credits have been retired this quarter, compared to Q1 2016, there has been Q1 2016 Q2 2016 % Difference an unexpected surge in issuances from cookstove projects. This quarter, nearly 3 Issued CERs 609,042 707,364 +16% million cookstove credits have been issued into the market, with over 90% of the issued VERs 1,877,384 3,869,568 +106% credits coming from just three projects (see figure 6 for more information). Validated A/R VERs 45,230 74,636 +65% Total Issuances 2,531,656 4,651,568 +84% Total VER Retirements 1,879,526 1,972,757 +5% Fig. 5* 2 million GS VERs retired in Q2 2016 Q2 2016 issuance + retirement volumes by project type Figure 6 tracks the issuance and retirement volumes by project type for Q2 2016. There has been a larger issuance than expected from cookstove projects. More emission reductions from wind, water purification and energy efficiency projects, such as household lighting, were retired than issued. Fig. 6 3.9 million GS VERs issued in Q2 2016 Q2 2016 retirement volumes by location Table 2 provides some insight into which regions retired credits from which countries in Q2 2016. Projects based in Africa or Asia received the most retirements. Table 2 *This graphic is for guidance only to give an indication of the market for Gold Standard credits. There may not be a direct correlation between retirements and issuances - i.e. retirements could have be made against projects issued in previous quarters.
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