Nature-based solutions (NBS) are important in addressing societal challenges, such as climate change, biodiversity loss, and food security often linked to the UN’s Sustainable Development Goals (SDGs).

The NBS projects (in ecosystems such as forests, grasslands, wetlands, and coastal zones, or projects that improve agricultural sustainability) absorb more CO2 or prevent the release of greenhouse gases, while also delivering benefits to local communities and biodiversity of the area.

Lower-emission carbon solutions are being developed, but closing the gap quickly relies on a rapid demand for voluntary carbon credits to supplement broader decarbonization efforts. As a “catch-up” effort to meet Paris Agreement’s targets, high-quality carbon credits including from nature-based projects play an important role.

Historically, average prices for carbon credits have been low, when compared to the “required” cost necessary to abate operational emissions. There are several reasons for this, namely:

• lack of trust in the legitimacy and efficiency of carbon credits, resulting in conservative corporate demand.
• an absence of incentives for companies to decarbonize in the short-term; and
• an oversupply of low-quality credits and a lack of uniform minimum quality standards.

The proximity to a buyer’s value chain, the geographic location of projects, the vintage of the carbon credit (as standards have developed, newer credits might be preferred), and the branding value of projects (i.e. the “story” of a project and its benefits) all impact individual prices.

In recent years, nature-based removal credits (such as afforestation projects) have commanded the highest prices due to a limited supply of this type of credit and perceived high quality.