VCM Sees Slowing Growth in 2022

Retirements in the voluntary carbon market (VCM) are set to grow at the slowest rate since 2016, with potential to shrink in 2022, our data shows.

Using monthly retirement data since 2012, we have forecast the total number of credits to be retired this year to reach 201m, versus 196m in 2021 (including voluntary retirements on CDM). The forecast’s 95% confidence interval shows upper and lower bounds to be between 183m (a year-on-year decline of 7%) and 220m (growth of 12%). The last time the market saw a decline in the number of credits retired was between 2015 and 2016, falling from 47m to 44m.

The lack of growth is driven by a slowdown in retirements of renewable energy and forestry credits. It’s the first time in the history of the market that retirements from both sectors declined in two consecutive quarters simultaneously, the rule of thumb definition for a recession in financial markets.

Despite the gloomy data, the silver lining for those in the space is that retirements have generally kept pace with last year’s levels. As of this writing, the number of credits retired is up 10% vs. the same time last year. However, 2021 saw a rush of retirements following COP at the end of November, also coinciding with the launch of Toucan and KlimaDAO. As credit bridging onto the blockchain has been paused pending review, we do not foresee the same uptick to take place this year.

We have published a fuller data analysis in a 30+ slide presentation, which you can download on our site. For more information, please reach out to hello@alliedoffsets.com.