BloombergNEF says prices for carbon offsets – verified emissions reductions equivalent to one ton of carbon each – could be as high as $120/ton or as low as $47/ton in 2050, depending on what types of supply are eligible to meet the rapidly expanding universe of sustainability goals, as well as who the primary customers are in the market.

In its inaugural Long-Term Carbon Offset Outlook 2022 report, the research firm claims that if all offsets continue to be permitted, including those which avoid emissions that would otherwise occur, the market will be oversupplied with largely worthless credits, thereby driving down prices and attracting criticism around quality.

Equally, if the market is restricted to just offsets that remove, store or sequester carbon, there will be insufficient supply to keep up with demand, causing significant near-term price hikes and damaging liquidity.

And if the market evolves to primarily help countries achieve their climate targets rather than companies – a possibility outlined at COP26 – it will soften this supply shortfall. Yet, this is still not ideal for the long-term success of carbon offsets.

Kyle Harrison, head of sustainability research at BloombergNEF and the lead author of the report, said: “There will be growing pains in the coming years as stakeholders try to understand how to sustainably grow the carbon offset market and determine who it will serve.

“If done correctly, their patience could be rewarded with a market valued at more than $550 billion by mid-century,” he said.

“Suppliers, buyers of offsets, traders and investors will need to balance what is idealistic and what is realistic otherwise, they risk the offset market burning out just as it’s getting started.”

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Forecasted carbon offset prices by scenario. Pic: BloombergNEF

 

Demand and prices for carbon offsets under three scenarios

BNEF models supply, demand and prices for carbon offsets under three scenarios: a voluntary market scenario, an SBTI (Science Based Targets initiative) scenario and a hybrid scenario.

Offset prices range from $11-$215/ton in 2030, up from just $2.50 on average in 2020, before narrowing to $47-$120/ton in 2050.

The voluntary market scenario assumes the offset market remains similar to how it looks today.

Demand comes from corporations with sustainability goals and surges to 1 billion metric tons of carbon dioxide equivalent in 2030 and 5.2GtCO2 in 2050 – the latter of which is equivalent to 10% of global emissions today.

All types of supply are permitted, including offsets that avoid emissions rather than removing them, like clean energy and avoided deforestation.

Due to the lack of regulation, supply is nearly four times greater than demand in 2030 and is still 30% greater in 2050.

Low prices give companies flexibility to meet their sustainability goals, but subsequently undermine their ability to drive true additional decarbonisation, inviting criticism for a lack of quality.

It also provides developers and traders with little financial incentive to participate, meaning the market never takes off and is relegated to back-alley deals for low-quality credits.

The SBTI scenario limits supply to removal offsets like reforestation and nascent technologies such as direct air capture.

Activity is still driven by corporations, but only for offsets that store or sequester carbon, rather than avoiding emissions that would otherwise happen – an outcome pushed by a number of groups.

Hybrid scenario: assumes removal-only market for countries by mid-century 

The hybrid scenario looks at a gradual evolution of the offset market, from the voluntary market today, to a removal-only market for corporations and finally to a removal-only market primarily for countries, rather than companies, by mid-century.

This assumes that a global carbon market allowing countries to buy and sell verifiable emission reductions – similar to what is being discussed under Article 6 at COP26 – overtakes the current company-run market.

Prices rise to a manageable $48/ton in 2030 before shooting up to $217/ton the following year and gradually dropping to $99/ton in 2050. While the price outcome of the hybrid scenario is more ideal for all parties involved, it assumes some major market developments in the coming years and is still an unpalatable jump from today’s prices.

“No matter the scenario, corporations and other entities looking to buy carbon offsets shouldn’t expect them to be a get-out-of-jail-free card for much longer,” said Harrison. “As the market matures – which it will – and processes are put in place to make offsets resemble a traditional commodity, prices will inevitably rise and companies will need to prioritize their gross emissions more than ever.”

 

Major energy project on VIC Mornington Peninsula gets green light

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Victoria’s Mornington Peninsula Battery Energy Storage System is now one step closer after receiving development approval. Pic: Maoneng

 

Australian renewables company, Maoneng, has nabbed development approval for its proposed 240MWp/480MWh Battery Energy Storage System (BESS).

The $190M project – targeted for completion in mid 2023 – will draw and store energy from the grid during off-peak periods and dispatch energy to the grid during peak periods, generating power for about 400,000 homes.

An engineering, procurement, and construction contractor is scheduled to be announced in the coming weeks.

 

ASX green energy stocks

CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
AST AusNet Services Ltd 2.5 -2% -1% 39% 44% $9,651,510,505
AVL Aust Vanadium Ltd 0.046 39% 59% 142% 84% $154,226,228
BSX Blackstone Ltd 0.805 11% 40% 115% 92% $316,966,283
DEL Delorean Corporation 0.225 -4% 10% 13% 0% $39,529,222
ECT Env Clean Tech Ltd. 0.029 -3% -36% 123% 190% $46,059,216
FMG Fortescue Metals Grp 21.39 2% 13% -16% -14% $62,934,042,924
GEV Global Ene Ven Ltd 0.105 -5% 8% 57% 24% $57,117,949
GNX Genex Power Ltd 0.19 -3% -7% -19% -16% $197,931,508
HXG Hexagon Energy 0.075 -1% 9% 3% -32% $31,666,982
HZR Hazer Group Limited 1.17 -7% 9% 39% -9% $190,589,717
IFT Infratil Limited 7.64 -1% 2% 5% 14% $5,591,094,431
IRD Iron Road Ltd 0.19 0% -5% -31% -10% $151,146,532
LIO Lion Energy Limited 0.062 -13% 0% 32% 88% $27,697,164
MEZ Meridian Energy 4.38 0% -3% -14% -35% $5,458,714,393
MPR Mpower Group Limited 0.046 15% 10% -44% -23% $10,217,518
NEW NEW Energy Solar 0.81 -1% -1% 1% -10% $259,676,269
PGY Pilot Energy Ltd 0.054 0% -4% -34% 38% $27,588,094
PH2 Pure Hydrogen Corp 0.475 -10% -6% 179% 228% $169,330,660
PRL Province Resources 0.155 11% 11% 11% 675% $158,152,374
PRM Prominence Energy 0.012 9% 50% 0% 33% $15,415,306
QEM QEM Limited 0.21 8% 17% 24% 147% $24,386,017
RFX Redflow Limited 0.05 0% 6% -19% 80% $69,799,206
SKI Spark Infrastructure 0 -100% -100% -100% -100% $5,036,718,784
VUL Vulcan Energy 10 -1% -18% 10% 1% $1,297,650,916
CXL Calix Limited 6.41 1% 6% 109% 519% $1,088,883,857
KPO Kalina Power Limited 0.025 4% 4% -17% -46% $34,770,894
RNE Renu Energy Ltd 0.092 0% 12% 70% 56% $14,483,826
LCK Leigh Crk Energy Ltd 0.155 3% 3% 11% 3% $138,593,986
LIT Lithium Australia NL 0.13 13% 24% 13% -24% $133,714,556
CWY Cleanaway Waste Ltd 3.05 0% 2% 20% 19% $6,308,585,101
EDE Eden Inv Ltd 0.018 -10% -10% -22% -40% $43,974,378
M8S M8 Sustainable 0.019 15% 27% -21% -64% $7,970,119
EGR Ecograf Limited 0.66 -4% 3% -8% 110% $315,233,421
CNQ Clean Teq Water 0.655 -6% -8% -42% 0% $29,926,337
CPV Clearvue Technologie 0.38 12% 58% 12% 29% $83,605,393
MR1 Montem Resources 0.046 -8% -22% -4% -79% $11,712,515
SRJ SRJ Technologies 0.43 0% 0% 110% 4% $31,927,139
SPN Sparc Tech Ltd 2.12 37% 45% 524% 563% $126,266,996
TNG TNG Limited 0.09 10% 15% 48% -10% $122,180,804
ADX ADX Energy Ltd 0.008 -20% -11% 0% 14% $28,257,153
FGR First Graphene 0.22 7.5% 2.5% -15% -25% $121,070,000
NMT Neometals Ltd 1.8 9% 5 251% 442% $915,788,581

 

The two biggest winners this fortnight – Australian Vanadium (ASX:AVL) and Sparc Technologies (ASX:SPN) – are up on no news.

Lithium extraction technology developer Lithium Australia NL (ASX:LIT) gained 13% after the reveal of a large lithium system identified at the Bynoe Lithium Project – a joint venture project with Charger Metals NL (ASX:CHR) where LIT owns 30%.

The company is also focused on the recycling of energy metals from spent batteries, such as lithium-ion batteries, through its 90%-owned subsidiary, Envirostream Australia Pty Ltd.

Nickel explorer Blackstone Minerals (ASX:BSX) made a strategic investment in battery metal player, NiCo Resources (ASX:NC1) – the owner of one of the largest, undeveloped cobalt-nickel projects’ in the world, the Wingellina project.

The project straddles the triple-point of the Western Australia, Northern Territory, and South Australia borders.

Surging 7.5% this fortnight is First Graphene (ASX:FGR), after announcing its five-year collaboration agreement with global construction chemical manufacturer, Fosroc International for the development of ‘green cement’, which will include graphene-enhanced cement additives.