SINGAPORE - The first major carbon credit auction brokered by the Singapore-based Climate Impact X (CIX) has fetched US$27.80 per credit, which translates to a premium of close to 40 per cent above current spot prices for major credits of similar vintage, the carbon marketplace said.

The credits, each to remove one tonne of carbon dioxide from the atmosphere, were tied to the Delta Blue Carbon project in Pakistan, the world’s largest mangrove restoration project. This auction, which was oversubscribed, features its first project issuance.

In a statement with its auction partner, carbon finance company Respira International, CIX – a joint venture between DBS Bank, the Singapore Exchange, Standard Chartered and Temasek – said 250,000 of the credits, of 2021 vintage, were sold at the rate through the auction.

The buyers were concentrated in Asia, Europe and the United States, said CIX, adding that the reserve price ended up being $10 per tonne higher than current spot prices for major Redd+ nature-based solutions of the same credit vintage.

Redd+ is a United Nations-backed framework that aims to curb climate change by stopping the destruction of forests. Nature-based solutions refer to projects that protect and restore natural ecosystems such as forests, mangroves and coastal habitats.

Transactions in voluntary carbon markets are primarily exchange-traded or take place over the counter at the moment. CIX said auctions are a new method to help scale this market by driving pricing transparency, value discovery and accessibility to quality credits.

To play its part in facilitating price transparency, CIX also published its auction demand curve, showcasing the range of bid prices submitted.

The table showed that 30 per cent of the bid volume was priced at US$35 per tonne or more, which is 27 per cent above the US$27.50 reserve price.

CIX said this signalled the premium at which some buyers were willing to pay for “high-quality and unique credit types”.

The reserve price did not settle for the higher bid amounts as the auction was structured to allow successful participants to be awarded a common final settlement price, which would be the lowest price of all allocated bids that collectively cleared the volume on offer.

CIX chief executive Mikkel Larsen said the way the auction was designed to unlock liquidity in carbon markets through the discovery of clear demand and price signals.

The outcome offers reassurance that demand “remains robust”, he said.

Respira comes in by supplying carbon credits for the auction.

The Delta Blue Carbon project from its portfolio is expected to produce 128 million carbon credits over its 60-year lifetime and sequester 142 million tonnes of carbon from the atmosphere.

The project, developed by Indus Delta Capital, focuses on protecting and restoring 350,000ha of tidal river channels and creeks, low-lying sandy islands, mangrove forests and inter-tidal areas along the south-east coast of Sindh in Pakistan.

Respira CEO Ana Haurie said its long-term offtake agreements with project developers offer them revenue certainty, adding that there is a profit-sharing mechanism which ensures that upsides are shared with developers as demand and prices grow.

“We strive for higher prices for high-quality carbon credits in the market to channel private capital into these much-needed climate solutions, and are delighted to see such a strong demand signal,” she said.

“CIX’s focus on telling the suppliers’ story and showcasing the good work of project developers makes them an ideal partner to catalyse finance for these solutions,” she added.

The auction came ahead of CIX’s launch of its spot trading platform, expected in early 2023. THE BUSINESS TIMES