Vitol, Trafigura don’t expect carbon market liquidity to pick up before 2025

SINGAPORE (Reuters) – Top global commodity traders Vitol and Trafigura do not expect carbon market trading volumes to pick up before 2025, their heads of carbon trading in Asia said on Tuesday, citing lack of consistent global standards for trading and a funding crunch.

Voluntary carbon markets have shrunk for the first time in at least seven years, with industry officials facing questions over findings that several forest protection projects did not deliver promised emissions savings.

A Trafigura executive said he expected volumes to pick up in 2025-26, while a trader at Vitol said he expected it to increase in 2026-27.

Carbon traders are now hoping for consistent global standards and the growth of compliance markets in major emitters such as China and India to drive a surge in volumes.

“We’re probably looking at 2025-2026 where you’re going to see a proliferation of compliance markets emerging, but also a lot of the standards also emerging with it,” Rushan Pandya, head of carbon trading, Asia Pacific, at Trafigura told the FT Commodities Asia Summit.

It might still be years before countries can offset their emissions in an international carbon market first called for in Article 6 of the 2015 Paris climate accord.

James Larmouth, head of carbon trading in Asia for Vitol, said a lot of the initial modelling on volumes and prices was unrealistic.

“A lot of those projects are still there, whether they’re able to monetize the units at the same way that they modelled them out. I don’t really think they’re able to,” he said.

Trafigura’s Pandya said he was seeing customers go from seeking project specific requirements to shunning “certain projects,” adding the industry required clear standards to seek capital to help it grow.

“This market needs scale. What does it need? It needs capital. But in order to get people comfortable, whether it’s the banks or the buying entities, you need that standardization,” he said.

(Reporting by Sudarshan Varadhan; Editing by Mark Potter and Louise Heavens)