5 years: Carbon Markets
After selecting your carbon credit, you need to figure out a buying strategy. Join Sam Hope as he explores what the best strategies are according to volume.
After selecting your carbon credit, you need to figure out a buying strategy. Join Sam Hope as he explores what the best strategies are according to volume.
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5 mins 35 secs
The spot market has been the primary route to market utilised by carbon credit buyers. This route means that credits purchased are those that have already been issued to a developer or reseller account and can be transferred or retired. Credits can also be purchased via forward contracts where there is an agreement between the buyer and seller to purchase a quantity of credits at a future date and specified price. Lastly, you can invest directly into a project’s development, which offers the closest relationship an organisation can have to its supply of offsets.
Key learning objectives:
Outline the buying strategies for carbon credits
Identify the advantages and disadvantages of each strategy
Understand where to buy credits according to volume
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What are the 3 buying strategies for carbon credits?
1. Spot market
The spot market has been the primary route to market utilised by carbon credit buyers. This route means that credits purchased are those that have already been issued to a developer or reseller account and can be transferred or retired. Spot carbon credit purchases can be made in a wide range of places.
2. Forward contracts
Credits can be purchased via forward contracts where there is an agreement between the buyer and seller to purchase a quantity of credits at a future date and specified price. Forward purchases can be made through carbon trading companies or directly with project developers. This method usually fits the needs of large entities with large market exposure. This is becoming a more popular buying strategy due to the stronger relationship with the project and is particularly relevant to buying carbon removal credits for a net zero timeline.
3. Project development investment
Investing directly into a project’s development offers the closest relationship an organisation can have to its supply of offsets. The business can be very specific in the project criteria it wishes to select and offers the possibility to align certain corporate goals for stronger marketing and stakeholder management.
1. Spot market
Advantages
Disadvantages
2. Forward contracts
Advantages
Disadvantages
3. Project development investment
Advantages
Disadvantages
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