Highlights from a report on the state of the U.S. carbon market
Yesterday morning I attended a "special presentation" of the carbon market survey David summarized earlier. The panel discussion was a chance for the report’s authors to present the findings to industry participants. A couple of further comments, for those interested in this topic:
- The market is probably bigger than reported. Due to difficulties gathering data on this young and highly fragmented industry, the authors feel the market size estimate is conservative. It could be as large as $200 million in 2006. This is still pretty small, but real. That’s $200 million per year being sent to clean energy, efficiency, and sequestration projects.
- As noted, a large portion of the U.S. voluntary market consists of trees, but actually the proportion of "charismatic carbon" is lower then expected. The majority of voluntary buyers want projects such as renewables and methane capture. (Incidentally, I had somehow never heard the term "charismatic carbon" before, and I think it’s pretty funny. It’s like alluring argon, or seductive selenium, or … anyway.)
- The obsession with standards is palpable. People have a crazed look in their eyes. You can tell everyone is just kind of exhausted trying to sort out all of the competing project claims, and everyone is hoping the industry coalesces quickly around a few clear standards so the market can develop unimpeded. Of course, you can’t really force this sort of thing, so for awhile longer we’re going to have both VHS and BetaMax (and 8-track and laser disc and … ).
- Some other interesting ways that the voluntary market differs from the regulated market: much more focus on "micro-projects" that generate less than 5,000 tons of CO2 reductions and more emphasis on African projects. Probably this skew reflects the lower transaction costs of selling into the voluntary market. Downside: quality concerns. Upside: money to communities that really need it.
- The pricing spread was surprising even to me: $0.45 to $45. Actually, I was aware of the spread, but this was the first time I’d seen it broken out by project type. It turns out that trees are at both ends of the pricing spectrum, a far wider spread than any other project type. There is not a simple linear relationship between price and quality, but … $0.45 per ton? Yikes.
- Speaking of trees, my sense is that in the future we’re going to hear a lot more about "avoided deforestation" projects, as opposed to reforestation projects. This may be heartening to Grist readers, who seem particularly concerned about protecting old growth. I mentioned in my last post on this topic that there is a lot of effort going into solving the issues around trees, and, well, there is.