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Voluntary Carbon Offsetting Hits Three-Year High

The market for voluntary carbon offsetting hit a three-year high in 2011, with transactions worth more than $576 million taking place, according to research by environmental markets information service Ecosystem Marketplace.

This figure is second only to 2008 when $776 million in trades were made, according to the 6th State of the Voluntary Carbon Markets report.

In 2011, corporate buyers continued to dominate the market, contributing $368 million – or nearly 65 percent – of the market’s total value, with European corporate buyers remaining the largest source of voluntary offset demand. There has been a significant increase in demand from US buyers, led by corporate purchases, the report says. Many corporate buyers used offsets to meet sustainability targets and “green” their supply chains, while others used them to connect with consumers and employees, according to Ecosystem Marketplace.

Trading activity in the “over-the-counter” market – where most of the market’s value is created – remained strong, branching into new project types and markets. While the number of transactions increased in 2011, the volume of offsets transacted decreased, because the market did not see a repeat of one large outlier trade from 2010.

Ecosystem Marketplace expressed surprise at the ascendance of offsets generated by wind farms, which had previously lagged behind offsets from projects that sequester carbon in trees. In 2011, in response to both economic and competitive conditions, project developers rushed wind projects to market, sparking purchases from cash-strapped buyers who might normally have gravitated to pricier forest-carbon projects. In Africa, the number of offsets from projects that promote the use of clean cookstoves among the rural poor surged at least 40 percent, the report says.

The value of the world’s carbon markets declined by 21 percent in the first quarter of 2012, despite trading volumes above the historical average, according to analysis from Bloomberg New Energy Finance. Global carbon markets fell to €14.2bn ($19.2bn) over Q1 2012, according to Bloomberg. This was 41 percent less than in the same period a year ago.

Bloomberg attributed the drop to a 50 percent decline in the volume-weighted average carbon price compared with Q1 2011, to €6.6/t over Q1 2012.

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