How’s this for a week-ending down note: in addition to war in Europe, we could lose the Amazon rainforest, one of the world’s largest natural carbon sinks and a major source of nature-based carbon offsets on the VCM.
More info below.
Rainforest Tipping Point
The rather alarming outlook for the Amazon comes by way of a decades-long study. The concern is that the entire ecosystem is nearing a tipping point, after which even natural disasters – such as fire – can cause irreparable damage to the broader system.
Nothing’s set in stone, of course, and predicting the future of entire ecosystems is notoriously difficult. The concerns for the Amazon are real, however.
Nature Loses, Europe Gains
Could the previous news item have influenced this one? Hard to prove directly, but the facts themselves are straightforward: nature-based carbon offsets had a tough week. Tuesday saw a brutal 16% drop, one of the largest single-day losses, for the leading Nature-Based Carbon Price NGEO. Exact causes for the drop are unknown, but likely due to a combination of bad news on the climate change front and the looming threat of a western recession.
On a more positive note, the EU ETS price gained 17%, the largest single-day gain ever. That still wasn’t enough to entirely offset the massive 30% drop which occurred after the start of the Ukraine-Russia war, but it highlights the ongoing demand for carbon offsets in the midst of political turmoil and an ongoing energy crisis.
Booming Markets: China Edition
The establishment of China’s own cap-and-trade system was big news for the global carbon market. Now, the program is poised to get even bigger. A recent survey indicated that a number of new sectors are set to join the market, including:
That’s not an exhaustive list. As more industries join the scheme, demand for carbon credits will rise, pushing prices higher. Just how high is an open question, but some experts estimate a potential 78% increase by 2025. That’s quite a rapid rate of growth, but it makes a bit of sense: the scheme has only been open since July, but it reported a cumulative trading volume of 186.7 million tonnes in February.
300% increases in revenue year-on-year are always noteworthy. It’s no surprise that those gains mark an industry leader, whose platform hosts 90% of all transactions on the VCM globally.
And yet, Xpansiv is soon set to get even bigger.
Ahead of its Australian IPO, Xpansiv is raising capital and pursuing M&A. There’s an estimated $2 billion market capitalization looming for them. The best sign? The VCM is set to grow just as quickly as Xpansiv, keeping the gains coming (potentially).
There are billions of dollars at play on the VCM. Xpansiv is aiming for its share and more.
Carbon Fact of the Day:
The Amazon rainforest stores around 123 billion tonnes of CO2, both below and above the ground. That makes it easily one of the largest terrestrial carbon sinks on the planet. More alarmingly, however, some parts of the Amazon have already begun to emit more CO2 than they absorb. This is mostly due to deforestation and burning.