How Much Do Carbon Credits Cost?
Is one carbon credit worth fifteen, twenty or one hundred USD? The price of carbon credits varies on many factors: category, geographic location, vintage (like wine!), and more. Learn why…
HEADS UP: This article is about carbon credits on the voluntary carbon credit market. If you’re looking for more information about the difference between the regulatory carbon market and the voluntary carbon market, please see this article.
How Much Do Carbon Credits Cost?
Here’s the short answer:
According to S&P Global Commodity Insights, in 2021, the price of one-carbon credit (the equivalent of one metric ton of CO2) ranges from “a few cents per metric ton of CO2 emissions to $15/mtCO2e or even $20/mtCO2e for afforestation or reforestation projects to $100 or even $300/mtCO2e for tech-based removal projects such as CCS [carbon capture and storage].¹”
Here’s the long answer:
The price of carbon credits on the voluntary market is rapidly changing. But it is on an upward trend. A McKinsey report on scaling voluntary carbon markets suggests that, “the market size in 2030 could be between $5 billion and $30 billion at the low end and more than $50 billion at the high end.³” What is going to determine if the market hits the low end of the high end? How carbon credits are priced.
Determining a Carbon Credit’s Price
It seems obvious, but we have to say it: knowing the price range of carbon credits is important so that businesses and individuals can plan their carbon offset goals. But the price of a specific carbon credit depends on a number of moving pieces.
Setting a standardized price on a carbon credit is not only impossible, but it is also incoherent with the idea of a carbon credit market. And yet, a real market value for carbon credits must exist. Let’s look deeper into how carbon credits are priced.
Here are a few of those price determinants:
- The physical location of the project,
- The type of project being financed to issue the carbon credits,
- The vintage, or age of the project,
- The delivery time of the carbon credits (how many years until they can be integrated into the company’s accounting),
- The traceability, monitoring and correlation to reality on the ground (if the forest has burned, it should’t keep emitting credits),
- The certifier name and its certification methodology.
On top of that, there are two main categories of carbon credit type that determine price. These are ‘avoidance’ carbon credits, and ‘removal’ carbon credits. Learn more about them in our article.
Trust and Traceability
“As prices increases, scrutiny from mutliple internal and external stakeholders on what is being bought will also likely increase. This will accelerate the momentum to identify and acquire higher-quality credits.”³
Like the saying goes: you get what you pay for. At CarbonABLE, we believe that what makes a carbon credit valuable is that the project is vetted, viable, and documented. It’s this expert knowledge, native to CarbonABLE, that allows us to create the best yield for our investors. Using blockchain technology as well as cutting-edge monitoring, our projects are transparent and traceable. And with the help of our partners, we select premium projects generating high-quality carbon credits to have the highest climate mitigation impact. We know that only by working together to protect and regenerate nature can we get out of this climate crisis.
(1)https://www.spglobal.com/commodity-insights/en/market-insights/blogs/energy-transition/061021-voluntary-carbon-markets-pricing-participants-trading-corsia-credits(2)https://www.mckinsey.com/business-functions/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate challenge#:~:text=These%20carbon%20credits%20would%20come,carbon%20dioxide%20from%20the%20atmosphere(3)2022 Carbon Credit Crunch Report, Sylvera