Accurate forecasting of Voluntary Carbon Market (VCM) supply is essential for sustainable business practices. In this blog, we delve into the process of creating a VCM supply forecast scenario report that examines the number of pending projects waiting to issue credits, and also calculates the estimated emission reductions they will achieve during their crediting period. Furthermore, we explore the correlation between AlliedOffsets policy scores and the supply of credits in different countries.
This forecast offers insight into the synergy between project developments, policy scores, and the future of carbon markets.
In our VCM supply forecast analysis we begin to look at the potential of pending projects as these projects represent a critical component of the future VCM supply. To provide a more comprehensive outlook, we analyse historical data and calculate the expected emission reductions these projects are expected to achieve throughout their crediting period.
Pending projects, while not yet contributing to the VCM supply, can become significant players in the carbon market. By assessing their individual crediting periods and historical performance data, we can estimate the emission reductions they are likely to deliver during their operational lifetime. This estimation is crucial for understanding how pending projects will contribute to future supply of credits in the market.
Figure 1: Pending Projects Issuance Forecast
Active projects represent another important piece in our VCM supply forecast scenarios. To create a comprehensive VCM supply forecast, we evaluate each project's specific crediting period and project the expected supply they will contribute throughout this period.
Active projects provide a consistent and ongoing source of VCM supply. By considering their crediting period end dates, we can look at how the supply of these projects most likely will look like in the coming years. Understanding this component of the VCM supply allows us to understand the market's stability and anticipate the future availability of carbon credits.
Figure 2: Forecasted Issuances Over the Years
For more information on our supply forecasting data, please download our VCM Forecast report!
In our analysis, we also uncovered a strong correlation between the pending supply from pending projects and the policy scores of the respective countries. This correlation underscores the pivotal role that policy plays in shaping the supply of credits in various countries.
The correlation indicates that favorable policy environments lead to a greater supply of credits. This allows us to more accurately model out the potential supply of credits from countries with friendlier policies toward projects.
A key aspect of our forecasting methodology is to account for new projects entering the market. As countries adopt more ambitious climate goals and regulatory measures, they pave the way for more innovative carbon offset projects. By accommodating these new projects in our forecast, we ensure a comprehensive understanding of the changing VCM supply. This not only benefits market participants but also aids policymakers in evaluating the potential impact of their policy decisions on the supply of carbon offsets.
Figure 3: Forecasted Issuances over the Years
This analysis forms one half of the equation: the supply of credits in the near term. Our team has also put together models around the potential demand for credits in the future: check out our latest report for that analysis, and how it fits in with the supply of credits in the near future.
For more information about our forecasting data, book a meeting with our team!