Carbon offsets price may rise 3,000% by 2029 under tighter rules

Bloomberg Market Specialists Jagteshwar Singh and Tiffanie Tan contributed to this article. The original version appeared first on the Bloomberg Terminal.

Background

The COP26 climate summit in November spurred a global push to zero out emissions, with the push including companies such as oil giant Exxon Mobil Corp.

Carbon offset programs, verified reductions in climate-warming gases used to compensate for emissions that occur elsewhere, have become a popular approach. But the regulation of projects to cut carbon and win credits is still in its infancy, and greenwashing is rife.

Financial leaders initially had lofty standards for participation in carbon offset programs. “You can’t buy offsets, as a company, unless you are reducing your absolute emissions, unless you have a high-quality net-zero plan,” Mark Carney of the Taskforce on Scaling Voluntary Carbon Markets told Bloomberg last year.

Yet those high standards haven’t panned out: Carbon offset programs are often unregulated and often limited to emissions, renewable energy or forest stewardship pledges. Only a tiny fraction of projects actually remove carbon from the air.

The issue

There is hope for these efforts, though new research from BloombergNEF warns that the market for carbon offsets will only be as strong as regulatory efforts to ensure participants’ actions create a significant climate impact.

The research examines potential outcomes under different regulatory scenarios for carbon offsets. An oversupplied, lax, voluntary market would result in very slow growth in prices, while a carbon removals-only scenario would cause a surge of as much as 3,000% by 2029.

The November COP26 climate summit spurred a global push to zero out emissions, even spurring oil giant Exxon Mobil Corp. to act. But the regulation of projects to cut carbon and win credits is still its infancy and greenwashing is rife. They are often not regulated by any recognized body and range from pledges to avoid emissions or deforestation to renewable energy and reforestation. Only a tiny fraction of projects actually remove CO2 from the air.

“The price of offsets could rise significantly, creating a $190 billion market as early as 2030,” BloombergNEF analysts wrote in a 2022 market outlook. “In other scenarios, prices could remain relatively flat for the next few decades, most likely preventing the market from ever really getting off the ground."

Global Emissions Offset CBL Futures for Jan. 22 traded at $7.53 a ton on Jan. 25, according to data from the New York Mercantile Exchange. Contracts expiring in July 2025 were last at $8.89. Using COMM <GO> allows for access to Bloomberg’s carbon pricing library where varying global carbon prices are available.

“The price of offsets could rise significantly, creating a $190 billion market as early as 2030,” BloombergNEF analysts wrote in a 2022 market outlook. “In other scenarios, prices could remain relatively flat for the next few decades, most likely preventing the market from ever really getting off the ground.”

Global Emissions Offset CBL Futures for Jan. 22 traded at $7.53 a ton on Jan. 25, according to data from the New York Mercantile Exchange. Contracts expiring in July 2025 were last at $8.89. Using COMM <GO> allows for access to Bloomberg’s carbon pricing library where varying global carbon prices are available.

Tracking

Use Bloomberg’s COMM, CCRV and BNEF tools to analyze the carbon trading market. Run NI ESG FFM for more stories focused on climate-related functions.

 

 

The emissions offset futures curve is in contango, with later-dated prices more expensive than near-dated ones. The curve has shifted higher from 2022, suggesting futures will be trading above $9 in late 2025.