Voluntary carbon trading becomes more competitive - Cargill

Quantum Commodity Intelligence - The trading of voluntary carbon offsets has become increasingly sophisticated and more competitive as more participants have entered the market in recent months, according to Iain Mackay, global head of carbon offset trading at Cargill, on Thursday.

Cargill, one of the world's largest agricultural traders, entered the offset market early by using its existing relationships with farmers and land owners, and investing heavily in the space.

It now holds one of the world's largest carbon offset trading books with a major focus on nature-based credits, said Mackay.

The trading of offsets has become more active as more companies have set up trading desks and with new intermediaries springing up.

"From a trader's perspective, it's a different world. Twelve months ago it was definitely a buyer's market, the bid/offer could sit around for months...It had very few platforms, limited price information and was very untransparent. It's almost turned on its head," he said.

"When we started it was very much environmental consultants that were the drivers of this market. That has started to turn a bit. You've got hedge funds getting involved and beginning to take stakes in project developers."

Developers now have plenty of choice for selling their credits, and Mackay say traders increasingly have to offer new options to win deals, such as private finance or offtaking.

Supply looks ample at the moment, with credit issuances more plentiful than retirements, but the supply/demand balance is shifting and could turn into a deficit by 2023 or 2024.

Cargill is a big investor in nature-based carbon credits and believes the price is likely to continue to appreciate over time, whereas the lower quality credits could suffer in the short-term following the Russian invasion of Ukraine.

"It's so hard to find the best quality credits...The market is super short for reforestation and afforestation credits...I could see those being over $20 this time next year. The right projects are definitely going to be increasing in price," said Mackay.