Offset Pricing: How much do offsets cost?

eurosIt is nearly impossible to give a precise overview of current offset market prices, as the market is considerably fragmented due to the variety of available standards, project types and locations, delivery guarantees, contract terms and conditions, the range in quality of offsets, etc. In a competitive market, offset prices are a function of supply and demand. The compliance market is much larger than the voluntary market, because demand in the voluntary makret is much lower. Corespondingly, voluntary offsets tend to be considerably cheaper than compliance credits.

The attractiveness of a project depends on the buyer’s objectives. These are different for a compliance buyer than for a voluntary buyer: Compliance buyers are interested in obtaining credits reliably and cheaply in order to fulfill their regulatory requirements. Most institutions that voluntarily use offsets for their climate neutralization efforts want to communicate that effort to the public and choose projects that are well-received by the target group.

In Europe, voluntary buyers are especially interested in biomass, renewable energy and end-user energy efficiency projects from less developed countries. Other emission reduction projects such as industrial gas projects at chemical plants are less attractive to these buyers because, despite their emission-reducing capability, such projects deliver very limited co-benefits such as job creation and protection of local ecosystems.

In the US, voluntary buyers prefer offsets generated by domestic projects, and are less focused on project type or sustainable development components.