To help you understand these critical issues, Fastmarkets’ senior strategic markets editor, Sam Carew, sat down with Stuart Evans, chief economist and head of environmental products. They explored the key trends, challenges, and opportunities shaping both voluntary and compliance carbon markets.
Below is a timestamped summary of their conversation. Watch the full interview for an in-depth analysis of today’s carbon landscape.
Watch the full interview:
How do price assessments aid the market? [10.04]
In a fragmented market with thousands of projects, how can buyers determine the price and quality of a carbon credit? Sam Carew explains how Fastmarkets creates price assessments to bring transparency to the market. The process involves distilling various factors that influence a credit’s value.
For example, assessments are regionalized and differentiate between project types, as well as accounting for other factors such as multi or native species within reforestation projects. They also account for registry differences, noting a significant price gap between Verra and Gold Standard issued credits for ARR. Furthermore, the team looks at third-party ratings, observing that higher-rated projects typically command premiums. These detailed assessments help buyers and sellers make informed decisions and manage risk effectively.
How have carbon markets grown within the forest sector? [12.12]
Carbon is becoming a vital factor in forestry. Stuart Evans explains that in the United States alone, around 10 million acres of forest land are now part of carbon projects, with this figure growing by about one million acres each year. For forest owners, carbon credits offer a new revenue stream that helps offset the volatility of traditional markets like lumber. This diversification makes their portfolios more resilient.
The discussion also touches on why US-based projects are so attractive. Strong legal frameworks and clear land rights reduce investment risk compared to some projects in the Global South. This security, combined with a lower cost of capital for established investment management companies, is driving significant growth, particularly in the US South where the pulp and paper market has faced structural challenges.
How does Fastmarkets calculate CORSIA compliance market forecasts? [13:40]
The international aviation offsetting mechanism, CORSIA, is set to become a major driver of demand, potentially reaching 250-300 megatons per year by the mid 2030s, according to Stuart. Forecasting this market is challenging due to uncertainties around supply and eligibility. He details how the Fastmarkets analytics team approaches this complexity.
They conduct route-by-route analysis for every international airline to forecast demand for CORSIA-eligible credits. On the supply side, the team assesses projects on an individual basis to determine which are likely to meet eligibility criteria. Their modeling suggests a tight supply during CORSIA’s first phase, likely leading to price increases before more supply becomes available in the latter half of the decade.
How will the EU continue to lead the growth of carbon pricing? [19:32]
The European Union has been a pioneer in carbon pricing since launching its Emissions Trading System (EU ETS) in 2005. Stuart Evans notes that the EU is now doubling down on this approach to drive decarbonization across its economy.
Key initiatives include the Carbon Border Adjustment Mechanism (CBAM), which extends carbon pricing to emissions-intensive imports, and the expansion of the EU ETS to cover buildings and transport emissions. The EU is also exploring a carbon removals and farming initiative, which would create price incentives for sequestration through land management and tech-based removal projects. This expansionist policy is influencing other countries, with nations like Türkiye, the UK, Australia, and Canada developing their own ETS or CBAM-like mechanisms.
What impact will CBAM have on commodity markets? [21.10]
The EU’s Carbon Border Adjustment Mechanism is designed to level the playing field between domestic and imported emissions-intensive goods like steel, aluminum, and cement. Stuart Evans explains that CBAM effectively exports European carbon pricing to imports, making higher-emission goods more expensive.
The financial impact is significant. Costs are projected to be around €9 billion in 2026, potentially rising to €22 billion by 2035. The iron and steel sectors are expected to bear about 75% of these costs. As a result, companies are rethinking their supply chains, seeking suppliers with lower carbon intensity. While policy uncertainty remains, the long-term trend is clear: carbon intensity will become a critical factor in the competitiveness of commodity players.
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