This week saw the release of the 2008 State of the Voluntary Carbon Markets report, subtitled “Forging a Frontier”.

A joint work by Ecosystem Marketplace and New Carbon Finance, the report is based on a survey of 150 players in the carbon offset market. Direct download here [2Mb PDF].

It’s a treasure trove of data on volumes, projects, countries and buyers. But in terms of carbon offsets, there are a couple of points to bear in mind.

First, the report covers all trade in the voluntary carbon market. But this is different from looking at the total amount of carbon which was offset.

How so? Because a single tonne of CO2e can be traded many times during its lifetime. In fact, this is usually the case.

Let’s say someone builds a wind farm in India, and sells the credits to a carbon broker in London. The broker offers the credits to a bunch of providers, who sell them on to buyers like you and me.

Now, each tonne of CO2e from the wind farm will be counted 3 times, once for each trade it was involved in. But how much does this help the planet? In terms of global warming, it’s still just a single tonne!

To be fair, the report makes this issue clear (Section 5.3 – Retirement), and estimates the actual volume of offsets in 2007. But this is easier said than done, since it’s based on a survey of sellers. In many cases, the seller of a carbon credit doesn’t know whether the credit will be resold or not.

The report also covers the Chicago Climate Exchange (CCX). Companies (mostly in the US) who sign up to CCX trade carbon with each other, in order to keep their emissions within a shrinking cap. While the CCX is indeed voluntary, it’s separate from carbon offsets as we know them. You can stay focused by looking for sections marked OTC (over the counter).

With this in mind, here’s a taster of what we learned:

• At least 10.7 million tonnes of CO2e were offset during 2007. Due to the issues mentioned above, it may be as high as 29.9 million.

• The carbon offset market grew 150–200% from 2006 to 2007.

• Project developers charged US $5.00 per tonne on average, while end customers paid $11.30/tonne. So overall 44% of buyers’ money went directly into project funding.

• As I suspected in an earlier post, businesses offset around 10 times as much carbon as individuals. And around 40% neutralize their entire carbon emissions, not just particular events or activities.

• Price is not an important factor. Instead, buyers are looking for top quality credits with social and environmental benefits. Page 32: “the story behind a credit is becoming an increasingly relevant component of its value”.

• The market is organizing itself around standards and registries. More on standards here.

• To top it all, we found 20 more providers to add to the 83 already in Carbon Catalog…

Many thanks to Katherine Hamilton, Milo Sjardin, Thomas Marcello and Gordon Xu for your hard work. Here’s that link again, and we look forward to 2009!