- Projects missing quality, permanence, economics elements
- Demand for carbon offsets could grow 40-fold by 2050: BNEF
According to Bloomberg article published on December 8, 2022, Macquarie Group Ltd. is rejecting almost all proposed carbon offset projects because they fall below the firm’s standards, a bank official said at the Asia Climate Summit in Singapore.
The Australian bank has reviewed 110 projects since February and “probably about 90% of them have defaulted,” Suraj Vanniarachchy, a vice president at the lender, said on Thursday. That’s because of “missing elements” in terms of the quality, durability and economics of the projects, he said.
Macquarie has encountered cases where “the same land, same projects have been claimed by different project developers,” Vanniarachchy said, leaving local communities in the dark: “I think people are trying to bake the cake with very bad ingredients and to put a nice icing on it.”
Demand for offsets could increase 40-fold to 5.2 billion tonnes of CO2-eq by 2050, equivalent to 10% of global emissions. Prices could reach $120 per ton in 2050. Banks open carbon trading desks and join commodities giants like Trafigura Group and Glencore Plc.
Macquarie wants a piece of that market. The bank expanded its global carbon team in April, hiring four people, including Vanniarachchy, to find and fund new projects, from cookstove initiatives to carbon capture technologies. Although the team is expanding its pipeline, its development approach is not “very aggressive,” Vanniarachchy said.
“We’re not saying we want to develop 1,000 projects,” he said. “We’ll probably make a good one or two.”
The Australian bank is not the only institution challenged by the limited number of high quality offset projects. The Malaysian stock exchange, which is launching its own voluntary carbon platform, has raised similar concerns. There is also regulatory risk as governments from India to Indonesia seek to limit exports of carbon credits.
The fear is that “the current government is saying we should do a carbon project and sign up,” Vanniarachchy said. “But five years later that has changed.”
