Carbon Registries Say ICAO Maintains Unfair CORSIA Eligibility Requirements

March 26, 2024

Carbon credit registries expressed frustration this week at the UN International Civil Aviation Organization's decision to withhold full approval of the credits they issue for eligibility under Phase I of its offsetting program, in large part, because key UN processes to which they must adhere have yet to be formalized.

The ICAO's Technical Advisory Body, in its meeting last week, submitted its evaluation of four carbon registries, Verra, Gold Standard, Climate Action Reserve and Social Carbon, that had applied to supply credits under the Carbon Offsetting and Reduction Scheme for Civil Aviation. TAB found that each of the registries had failed to ensure that credits will be "only counted once towards a mitigation outcome."

"The Climate Action Reserve is somewhat perplexed by ICAO's slow decision-making process," said CAR President Craig Ebert in a statement to OPIS. "We have been very responsive to any questions they have asked us and believe we have addressed any and all issues."

While the registries have put in place measures to ensure that voluntary buyers do not count credits twice, the use of offsets under Article 6 of the Paris Agreement puts the standards bodies in a difficult position, they said.

Article 6 requires that credits retired by non-state buyers and other countries receive a corresponding adjustment saying they will not also be counted by their host country towards its nationally determined contribution.

Neither Article 6.2, which governs the process by which countries account for mitigation activities and transfer credits between them, nor Article 6.4, which establishes a global marketplace for carbon credits for participation by public and private entities, has been fully approved by Paris Agreement signatories.

Article 6.2 has been allowed to progress, and several countries have begun to sign bilateral agreements for the exchange of internationally transferred mitigation outcomes, or credits that will be used toward NDCs.

But registries say that ICAO wants them to protect against a situation in which a project issues credits that are then claimed by the host country for its NDC, even when it has issued a corresponding adjustment.

"One challenging condition is that ICAO wishes project developers to replace credits if a host country reneges on its earlier authorization and instead uses the emission reductions and removals toward its climate targets under the Paris Agreement," said Verra Senior Director of Climate Policy and Strategy Andrew Howard told OPIS.

"Asking projects to backstop countries' targets - by providing new credits at their own cost - creates unreasonable political risk. Countries should instead be held accountable under the [United Nations Framework Convention on Climate Change] for backing out on earlier authorizations, and ICAO should be in a position to bring such cases there," Howard said.

A Gold Standard spokesperson reflected similar sentiments.

"As a standard supporting projects to be eligible under the first phase of CORSIA and later phases, the most challenging issue is the question of liability in the event that a host country reneges on a commitment to apply a corresponding adjustment, under Article 6," the spokesperson told OPIS. "We will reflect on the new conditions set by the ICAO Council, which - to be clear - expect a higher burden to be placed on project proponents in such a scenario. At the same time, we also hope that governments take seriously the political risk associated with the application of corresponding adjustments as things stand, and take active efforts through the UNFCCC, ICAO, and national frameworks to establish safeguards and instill confidence that governments will abide by their commitments."

Ebert added that the fact that Article 6.4 has yet to be operationalized adds further complications.

"A major stumbling block for everyone remains the lack of clarity by countries under article 6.4 to facilitate the necessary procedures for recognition of any credits that can be used for the CORSIA program," Ebert said. "The Climate Action Reserve has virtually no control over that process, but we are ready to implement whatever specific provisions are finally specified."

ICAO declined to comment on its deliberations and decisions last week.

The registries pledged to continue to work with ICAO to gain Phase I approval. The next deadline for program change notifications is April 15. ICAO will consider these changes at its next council session in September.

ICAO had previously granted conditional approval to the four registries it considered at its meeting this month.

The registries submitted program changes to ICAO's Technical Advisory Body last summer to adhere to its requirements. During a meeting last week, the organization approved findings from TAB that none of the registries had met its requirements. While all failed to avoid double counting, according to ICAO, the registries also fell short of other criteria.

Only two registries, ACR and the Architecture for REDD+ Transactions, have received full approval from ICAO for CORSIA Phase I.

Verra, Gold Standard, CAR and ACR represent the four primary carbon credit registries by issuance volume. Because only ACR has been accepted, the supply of CORSIA-eligible credits remains limited.

ClearBlue Markets estimated in a report last July that roughly 8 million credits issued by ACR were available for Phase I. In the time since, ART has issued about 7.14 million credits to Guyana for its national reducing emissions from deforestation and forest degradation (REDD+) activities. But roughly 2.5 million of those credits have already been sold in a previous forward transaction to the oil and gas producer Hess.

Together, these two volumes of credits fall well below projected demand for Phase I. CFP Energy, in a January report, estimated that Phase I, which runs from 2024 to 2026, will foster demand of between 64 million to 164 million credits.

CORSIA requires countries to offset and reduce emissions above 85% of its baseline set in 2019. Participation in Phase I is voluntary, but, as of January, 126 countries had elected to join.

With current supply falling far below demand, it is unclear how CORSIA-eligible credits will perform in the market.

Guyana's deal with Hess delivered its vintage 2021 to V25 REDD+ credits at a floor price of $20/mt and its V26 to V30 credits at $30/mt. According to their contract, if a market index price of REDD+ credits goes above that level, Hess will pay an added 60% of that upside.

This rate already stands far above most REDD+ transactions. OPIS calculated the V23 Voluntary REDD+ Credits Average at $11.71/metric ton on Monday.

The Phase I supply and demand picture stands in stark contrast to that of the CORSIA Pilot Phase, which concluded in December 2023. Eleven registries were approved to supply credits to the Pilot Phase. Due to a major drawdown in international travel resulting from COVID-19, offsetting requirements under the scheme were limited, however.

OPIS assessed its CORSIA Eligible Offset price, which tracks credits likely to be retired for the Pilot Phase, at 62cts/mt on Monday.

Reporting by Henry Kronk, hkronk@opisnet.com 
Editing by Kylee West, kwest@opisnet.com

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California's Infrastructure, Mandates Hinder Clean Energy

March 19, 2024

HOUSTON – California's optimistic timeline to a net zero future has hit several roadblocks of its own doing, panelists said Tuesday at CERAWeek by S&P Global.

Hyliion CEO Thomas Healy said the company has "pushed pause" on the electric powertrain side of the business due to thin customer adoption combined with the uncertainty looming over California legislation.

"The concern I see is that (California mandates) keep pushing out and pushing out and pushing out," Healy said. "One of the things that really drove that decision for us to pushing pause on the electric side of the things was the mandates."

"The mandates we saw CARB trying to enforce were just getting pushed," Healy added.

Healy pointed to mandates intended to go into effect at the start of the year, but have since been on hold.

"There's a mandate starting this year any new vehicle going into ports, it either had to be electric or had to be hydrogen," Healy stated. "As soon as the year started, that was pushed pause.

OPIS previously reported California Air Resources Board's Advanced Clean Fleets rule, requiring all newly registered drayage trucks to be zero-emission vehicles to phase out all diesel-powered engines across semi-trucks.

The California Trucking Association and the Owner Operator Independent Drivers Association filed a lawsuit against the agency, preventing CARB from moving forward with its ruling up until March 18, when U.S. District Court for Southern District of California Judge Roger Benitez tossed the suit in its
entirety.

"Remedying complexities and perceived deficiencies in AB5 are the kind of work better left to the soap box and the ballot box than to the jury box," Benitez wrote in his decision.

Vice president of the California Hydrogen Business Council Jennifer Hamilton also pointed to the state's infrastructure challenges as limiting factor in its effort to enforce mandates.

California's mandates will work together to expedite the transition to cleaner fuel technology and will incentivize companies to invest in renewable energy in the state, Hamilton said.

"So you could mandate the vehicles, but you have to have somewhere to get fuel," Hamilton said. "The timing of that I think still needs to be worked out a little bit and getting that infrastructure down before the vehicles come into ports whether that be trucks or cars."

Reporting by Sydnee Beach, sbeach@opisnet.com
Editing by Bayan Raji, braji@opisnet.com

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Oman's FZC Breaks Ground on World's Largest Polysilicon Plant Outside China

March 15, 2024

Oman's United Solar Polysilicon (FZC) started building its 100,000 metric tons (mt) per year solar-grade polysilicon plant on March 11, according to state-linked Oman News Agency (ONA) following a groundbreaking ceremony on the same day.

FZC's upcoming plant will be the largest solar-grade polysilicon producer outside of China, according to a source from a Chinese integrated solar manufacturer.

The 520 million Omani Rial ($1.35 billion) project, sited within Sohar Port and Freezone in Oman, is slated to commence operations in 2025, according to the statement.

The project aligns with objectives outlined in the Oman Vision 2040 for energy and renewable energy, the national reference for economic and social planning of the Sultanate of Oman during the period from 2021 to 2040 -- this sets out to facilitate economic transformation from an oil-dependent economy to a diversified and sustainable one, while also bolstering local value addition in targeted ventures, said Dr. Mansour bin Talib Al Hinai, Chairman of the Public Services Regulatory Authority.

Al Hinai said the project will additionally align with government policies concerning green hydrogen in the Sultanate of Oman. The locally produced polysilicon may help to lower the prices of solar panels, facilitating a reduction in operating expenses for the sector and thereby contributing to decreased energy prices.

Omar bin Mahmoud Al Mahrizi, CEO of Sohar Free Zone and Executive Vice President of Sohar Port, said the project is poised to attract numerous downstream solar manufacturing industries, encompassing cells, modules, and other ventures associated with solar component manufacturing in the region.

In January, Chinese solar material processing equipment manufacturer, Shuangliang Eco-energy Systems, announced that it had won the bid to supply United Solar Polysilicon with polysilicon production equipment valued at $58.32 million.

Based on public records, United Solar Polysilicon selected China National Chemical Engineering Sixth Construction as the project contractor, the latter having worked on numerous polysilicon projects by major Chinese companies including Daqo Energy, Xinte Energy, Tongwei, GCL New Energy, East Hope Group and Asia Silicon (Qinghai).

According to a source with knowledge of the Oman-based polysilicon project, it remains uncertain whether solar cells and modules manufactured using polysilicon from the Oman facility will gain access to the U.S. market in the future, amid regulation calling for supply chain traceability for products imported.

The source added that FZC's plant is strategically situated along the Belt and Road network, where there is substantial demand for photovoltaic (PV) installations, with polysilicon produced by the Oman plant possibly meeting needs of local solar projects. Southeast Asia is another significant target market for the factory's sales efforts, said the source.

($1 = 0.38 OMR)

Reporting by Summer Zhang,szhang@opisnet.com
Editing by Chuan Ong, cong@opisnet.com

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Scrutiny of Carbon Markets Is Welcome, How It Manifests Is a Problem: CAR President

March 19, 2024

Climate Action Reserve President Craig Ebert believes global carbon markets are nearing the ability to effectively serve a broad set of decarbonization strategies.

 Criticism of various projects and offsetting schemes has been deserved, Ebert added, but the factional opposition to the sector as a whole has had unintended consequences and has stifled the response to the climate crisis, he said.

 Climate Action Reserve is one of the world's four largest carbon credit registries. The organization's annual North American Carbon World conference begins this week in San Francisco. Ebert sat down with OPIS for an interview ahead of the event.

 "The challenge right now is that we have a pretty fractured market," Ebert said. "We're in the early stages of a truly global voluntary carbon market developing. No one should be under any illusion why that market is not fully developed and why it's just not ready for prime time, perhaps, today. We don'thave the scale to meet potential demand. But that's all the more reason, given the severity of the climate crisis, why we need to unleash the capital and send the right message to the entire global community." 

Carbon markets, in recent years, have been the subject of a range of media and academic criticism.

 "I think the scrutiny is fine," Ebert said. "The way it manifests itself is problematic. I have no problem with our work being under a microscope. We have a high degree of confidence in the work that we do. We're constantly reassessing it. We are constantly retooling our protocols in response to real-world experience and how they're working. There's a variety of reasons for that. Sometimes it's just trying to make them more cost-effective in the market. Other times, it's correcting misunderstandings of the way the protocol is specified. It should be viewed as a continuous improvement process."

 That goes for any effort that is addressing climate change, Ebert added, including both compliance- and voluntary market-oriented initiatives. "It's got to be defined by good faith efforts," he said.

 "What's unfortunate, is there seems to be a number of parties out there that are more interested in playing accusatory and gotcha politics," Ebert said. "They've uncovered what they believe to be a shortcoming of some credit somewhere and that somehow fundamentally calls into question the entire market. That's ludicrous."

 "I'm very open to constructive approaches to improving the quality of what's in the market," Ebert continued. "But too much of what's happened has just been an attempt to indict the concept of voluntary action. I think a lot of that's misguided. It's just missing the point."

 According to Ebert, project developers and the registries that validated them should bear the brunt of criticism for issuing low quality credits.

 "I think critics are wrong to single out companies for buying suspect credits," Ebert said. "It's akin to you buying a car and realizing that maybe you got a lemon. So someone's going to sue you for being stupid for buying a lemon. As if you don't have enough problems already."

 "I've worked with a number of fortune 1000 companies over the years," Ebert said. "Frankly, they're doing their best in a space they don't know, whether it's estimating their carbon footprint or deciding what mitigation actions they should take. Shine that light on those of us in the industry [developing the credits]. Let's have that discussion."

 Voluntary carbon stakeholders have worked to signal integrity among high-quality credits.  The Integrity Council for the Voluntary Carbon Market published its Core Carbon Principles and Program-level Assessment Framework in March 2023. ICVCM has used the documents to assess more than 100 carbon credit methodologies for their adherence to its standards. The group plans to begin to publish its findings and allow for CCP-labeled credits beginning at the end of this month.

 Providing voluntary carbon buyers with confidence in their purchases will be key for unlocking further capital and scaling the market, Ebert said.

 "The market needs that right now," Ebert said. "The types of criticisms that have happened up to this point are freezing a lot of corporate action. That shouldn't be a big surprise. People keep forgetting it's a voluntary market. At the end of the day, companies don't have to do anything."

 "With all the confusion in the market, and the unfair criticisms that are being leveled at companies, many are choosing to not do anything," Ebert continued. "And it's humanity that's suffering because we're not investing in aggressively trying to solve this climate crisis. That's the biggest travesty right now. There will be no climate justice without carbon credits. The sad truth is that countries, through the COP process, are simply not doing enough."

 During COP15 in Copenhagen in 2009, parties committed to funding climate action with a collective $100 billion per year by 2020. That goal was likely reached in 2022, the Organization for Economic Cooperation and Development said in November.

 "That was always intended to be initial seed capital," Ebert said. "And it's taken 15 years to get to the point. Who's going to pay for the transition to a non-carbon economy? Ultimately, it's likely to be the private sector. They're the ones that have access to enormous sums of capital and they've got the potential upside from the business perspective of investing in a low-carbon economy. We need to unleash that potential, not hamper it. Right now, it's being hampered."

Reporting by Henry Kronk, hkronk@opisnet.com  
Editing by Kylee West, kwest@opisnet.com and Micheal Kelly, mkelly@opisnet.com 

© 2024 Oil Price Information Service, LLC. All rights reserved.


CubicPV Halts 10GW Solar Wafer Manufacturing Plans in US Amid Restructuring [Exclusive]

February 8, 2024

U.S. solar manufacturer CubicPV is halting plans to build a 10-gigawatt (GW) solar wafer factory in the country as it undergoes restructuring, the firm told OPIS in statements on Feb. 8.

This is despite the firm having already made "significant progress" on delivering the U.S. wafer plant, which included completing 60% design, choosing a site, producing thousands of wafer and cell samples for customers, and securing silicon supply.

Construction was previously expected to be completed in 2024 with the factory to be fully ramped in 2025. CubicPV had said in a Dec. 2022 statement.

The firm will now "eliminate positions" tied to the U.S. N-type wafer factory as part of the restructuring. The factory was expected to create 1,500 new direct jobs, CubicPV previously said.

A long-term supply contract for solar polysilicon worth $1 billion signed between CubicPV and Korea-based polysilicon maker OCI Holdings late last year is also "no longer effective", a CubicPV spokesperson said.

OCI did not immediately respond to a request for comment from OPIS.

"Despite the work invested in the project and the competency of our team, the market moved against us," the CubicPV spokesperson said.

A "dramatic" 70% collapse in wafer prices "to unprecedented lows" since the passage of the Inflation Reduction Act (IRA) and "surge in construction costs" were among factors that thwarted the firm's efforts to realize domestic production in the U.S., CubicPV said in its statement.

With the "collapse in prices" across the solar value chain, "the production incentives within the IRA are no longer enough to support US solar manufacturing," the CubicPV spokesperson said. Under the IRA, manufacturers stand to gain $12 of federal tax credit per square meter of solar wafers made in the U.S.

"If we believe US solar manufacturing is of paramount importance to our energy security and economic competitiveness, our policy initiatives will need to keep pace with these changing dynamics," the spokesperson added.

CubicPV will now align all resources and operations to advancing its proprietary technology in tandem modules, which according to its website will "offer more than 30% greater efficiency than the highest efficiency conventional modules."

The firm, which has "one of the strongest tandem R&D groups" in the U.S., will prioritize solving the durability challenge that has kept perovskite from reaching commercialization, and is doing that on larger area devices, it said.

"No investors have pulled funding from the Company" and "our investors are fully behind our tandem development efforts," the CubicPV spokesperson said. "We believe the market will move to tandem and that we have the opportunity to lead that transformation."

CubicPV's project halt flags how growing production capacity in solar wafers, an upstream segment of the solar value chain, remains a challenge for the U.S. While the IRA, a sprawling federal bill passed in 2022, hands out incentives to support domestic manufacturing mainly via tax credits, most resultant new capacity is downstream.

Of the 155 GW of U.S. solar manufacturing added a year into the IRA, the ingot/wafer segment comprised only around 13% while around 83% was in the downstream cell and module segments, according to data released last August by the Solar Energy Industries Association (SEIA), the national trade association for the solar industry.

Chinese players have a more than 95% global market share in the solar wafer industry, and the sector is likely entering "a loss-making condition even for top-tier players," with the world's second-largest solar wafer maker TCL Zhonghuan booking "huge losses" in the fourth quarter of 2023, Dennis Ip and Leo Ho, analysts at Daiwa Capital Markets, said.

"If Cubic is not collaborating with Chinese players, it could be hard for it to be competitive in the wafer space, especially with Chinese players now already pushing wafer price down to cost level," the Daiwa analysts added.

CubicPV's Chief Executive Officer Frank van Mierlo will step down as a result of the restructuring. While the firm seeks a replacement, Tim McCaffery - a CubicPV board member and global investment director at Thai business conglomerate SCG, a shareholder of CubicPV - will serve as interim CEO.

An SCG subsidiary led a funding round that raised $103 million in equity funding in support of CubicPV's U.S. wafer factory plans and tandem product roadmap, CubicPV announced last June. The first tranche of $33 million was released immediately, while the second tranche was tied to specific project milestones.

Reporting by Nicholas Lua, nlua@opisnet.com
Editing by Hanwei Wu, hwu@opisnet.com

© 2024 Oil Price Information Service, LLC. All rights reserved.


Washington CO2 Allowance Prices Dive as Cap & Invest Faces Repeal Vote

Washington Carbon Allowance secondary market prices have fallen by $19/mt this month after a citizen-led proposal to repeal the state's Cap-and-Invest Program advanced in the state's Legislature. Lawmakers now have the chance to act on the initiative during the 2024 session or allow it to move to a statewide vote in November's general election.

OPIS WCA price assessments tumbled more than 35% since Jan. 8 as of Friday, sliding for 18 consecutive trading sessions after Initiative 2117 solidified an official challenge to the one-year-old program's longevity.

OPIS assessed the WCA V24 December 2024 price at an all-time low $34/mt on Feb. 2, down from $53.25/mt on Jan. 8. Prior to this month, that WCA price was last below $40/mt in December 2022, when trading first opened at $35/mt on the Nodal Exchange.

Though the legislature could choose to enact Initiative 2117 without any changes, it's more likely that the legislature will do nothing and the proposal will be placed on the November ballot, carbon industry analysts said. Washington residents will likely vote on whether or not to overturn the state's emission trading program, they said.

Analysts at ClearBlue Markets said the potential challenge to the Cap-and-Invest Program created continuous downward pressure on secondary market WCA prices this past month.

"For the WCAs, we maintain a bearish outlook - the program is likely to languish given the regulatory uncertainty," the firm said in a subscriber note on Jan. 22.

Initiative 2117 would prohibit all state agencies from "implementing any type of carbon tax credit trading, also known as 'cap and trade' or 'cap and tax' scheme, including the Climate Commitment Act." If passed, it would repeal 37 acts or parts of acts related to Cap-and-Invest and ban the state from creating similar programs.

Democrats in the Washington House and Senate fought to pass the Climate Commitment Act legislation during a close vote in 2021.

Washington Secretary of State Steve Hobbs validated signatures for the initiative to the legislature on Jan. 16, which had been initially certified a week earlier on Jan. 8.

"If the Legislature rejects the initiative (Initiative 2117), it will be certified for the next general election," ClearBlue said. "The Legislature can pass an alternative to also go on the ballot, but this appears less likely."

The campaign for Initiative 2117 argued that the increased cost to fuel suppliers and producers translated to higher costs at the pump for consumers in Washington.

State representative Jim Walsh (R) filed the initiative in November, and the 2023 signature campaign was founded by "Let's Go Washington" Republican donor Brian Heywood. Initiative 2117 totaled 466,072 lines of submitted signatures.

Governor Jay Inslee (D) said in a radio interview that he was supportive of cap-and-invest and the Climate Commitment Act, along with his supporters in the state Legislature.

During a radio interview with KIRO-FM in Washington on Jan. 5 in support of the CCA, Inslee said "We cannot allow infinite pollution, we've got to have a cap on the amount of pollution. We also have got to get to transparency."

ClearBlue analysts on Monday noted that campaigns on either side of the initiative will likely ramp intensity this year.

"New public disclosure data shows a $1 million donation to the No campaign through a group called 'No on 2117.' While this still trails the $7.3 million donated to the pro-ballot initiative, the fight for the future of the Cap-and-Invest program looks to intensify in the coming months," analysts said in a Feb. 5 report.

During the program's inaugural year WCA secondary market prices averaged $56.967/mt for V23 December 2023, according to OPIS price data.

WCA secondary market prices in 2023 peaked at $70.50/mt on April 14 before the state Department of Ecology held two Allowance Price Containment Reserve auctions to release more supply into the market and dampen prices in the second half of the year.

Reporting by Slade Rand, srand@opisnet.com
Editing by Mayra Cruz, mcruz@opisnet.com  and Jeremy Rakes, jrakes@opisnet.com

© 2024 Oil Price Information Service, LLC. All rights reserved.

--Reporting by Slade Rand, srand@opisnet.com: Editing by Mayra Cruz, mcruz@opisnet.com and Jeremy Rakes, jrakes@opisnet.com

Rainforest Coalition Sees 25 Million Article 6.2 ITMOs Available This Year

Roughly 25 million carbon offsets could be issued via Article 6.2 of the Paris Agreement this year, Kevin Conrad, executive director of the Coalition for Rainforest Nations, said last week in an OPIS interview.

Many, if not the majority, of the transfers will involve credits generated by United Nations Framework Convention on Climate Change (UNFCCC) REDD+ efforts. Suriname, a CfRN member, earlier said it would seek $30/mt for its credits.

Conrad said he expects the credits will sell between $20 and $30/mt, although a number of variables could affect negotiations between countries.

CfRN, which was founded in 2004 is an intergovernmental organization focused on forest conservation and economic development. It includes more than 50 countries and supports developing countries with UNFCCC REDD+ efforts.

While CfRN does not plan to create an OPEC-like cartel, there will be coordination, according to Conrad.

"Carbon pricing is designed to impact behavior," he said. "Without properly priced carbon, no one is changing behavior. You have a continuation of this avoidance-based voluntary system where projects can barely get above 10 bucks for any sustainable amount of time. No one is changing behavior. They're just greenwashing. They're just buying credits and calling themselves carbon neutral. And so, we're saying that you're never going to get a functioning carbon market without regulation, without stringency around methodological standards."

The average OPIS REDD+ V21 assessment - a vintage that accounts for a large portion of available supply in voluntary markets - was calculated Friday at $11.21/mt.

Article 6.2 of the Paris Agreement outlines the means by which countries can transfer carbon offsets, defined as internationally transferred mitigation outcomes, to another country to count towards the latter's Nationally Determined Contributions.

At COP28 in Dubai last year, parties negotiated key aspects of Article 6.2, including measures regarding transparency and confidentiality in ITMO transfer deals. While some countries pushed to keep terms of these transfers confidential, CfRN members, the EU and others stood firm on maintaining transparency.

Negotiators ultimately did not arrive at an agreement. As things stand, countries are free to pursue bilateral ITMO transfers, but there is the possibility they will be invalidated or require changes pending further decisions agreed to by parties.

With that said, much of the framework regarding ITMO transfers has been outlined by a series of decisions made by parties over numerous COPs. Among these is the stipulation that mitigation actions must be real, verified and additional per guidance from the Intergovernmental Panel on Climate Change. Measurement, reporting and verification must be reviewed and approved by the UNFCCC.

While several deals have been struck between countries for renewable energy and energy efficiency efforts, none have so far been verified by the UNFCCC. Several countries, however, are close to receiving REDD+ verification. Conrad said he expects Suriname will complete all necessary steps in the next few
months.

That country in September said it planned to issue the world's first REDD+ ITMOs within months. But, according to Conrad, country leaders were approached by voluntary project developers who sought to repurpose their efforts. Those negotiations eventually broke down and delayed Suriname's issuances.

The country's Ministry of Spatial Planning and the Environment did not respond to requests for comment.

Besides Suriname, Conrad expects to see Honduras, Belize and Paraguay issue offset credits this year.

Because no verified ITMO transfers have occurred, the first deals will play an important role in setting the price of carbon and future mitigation activities."I think a lot of countries will be going out and trying to test the market, trying to test their cost, trying to see what's going on," Conrad said.

Some structure has been laid down on the buyers' side by Singapore, which set a fixed price for carbon purchases at S$5/mt ($3.73/mt) in 2019 to 2023. The rate was increased to S$25/mt this year through 2025 and will jump to S$45/mt in 2026. The country expects to fix it at S$50/mt to S$80/mt by 2030.

At the same time, Conrad told OPIS that he expects the supply of REDD+ ITMOs to rise sharply in the coming years. "I don't know what will happen when some large countries come in, like Brazil, and start unloading billions of tons," Conrad said. "They could say, 'Well, for us, $3/mt works.'"

Still, there are mechanisms that allow for the voluntary cancellation of credits before they are sold on the market and that could serve to maintain higher prices.

"I don't see this free-for-all in pricing that a lot of market proponents would like to see," Conrad said.

Still, UNFCCC review takes time and Article 6.2 could be revised in subsequent COPs. In the meantime, countries must weigh the growth of voluntary carbon projects in their territories, which can often deliver revenue faster, with nation-wide mitigation outcomes.

Conrad recommended that countries be patient.

"There's no financial transparency in voluntary markets," Conrad said. "We did an audit in Papua New Guinea. We found that about 7% of income generated through projects registered with Verra made it into the country. I challenge every minister to do their own audit."

"You can sit on the outside looking in while voluntary market developers run off with your assets and keep the money offshore, sending just enough to keep you interested," Conrad continued. "Or you can engage in a mechanism that gives you full control. Now that Article 6 is starting to become almost real, I think most ministers are starting to transition away from the voluntary offering and trying to take responsibility."

Reporting by Henry Kronk, hkronk@opisnet.com
Editing by Jeremy Rakes, jrakes@opisnet.com  and Jeff Barber, jbarber@opisnet.com

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