How does the pricing for CO2-reduction credits work?
The prices for CO2-reduction credits differ. The pricing is based on the following criteria:
- Quality standard: Climate protection projects according to the Gold Standard are usually more costly than projects under the Verified Carbon Standard. This is mainly due to the fact that in addition to the CO2-reduction achieved by these projects, social criteria still have to be checked by the external project certifiers.
- Project size: A large wind farm saves significantly more CO2 at significantly lower monitoring costs per ton than a project in which 2,000 family biogas plants are built and maintained. This has a corresponding effect on the price of the reduction credits.
- Project type and location: With certain project types (e.g. reforestation, efficient cooking stoves) there is comparatively more demand and a correspondingly lower available supply of reduction credits. This leads to higher prices. The same applies to project locations - here too the market prices differ with the geography of a climate protection project (e.g. African projects are higher in price than comparable projects in China).
- Amount of emission reduction credits purchased: Volume discounts are also available in the market for emission reduction credits. These discounts have to be justified economically: the higher the purchase quantity, the lower the relative transaction costs. This reduces the transaction costs per ton of savings CO2, which lowers the price for the credits for higher purchase quantities.