Analysis of Carbon Markets and Offset Alternatives in Compliance and Voluntary Schemes to Commercialise Colombian Neutral Coal

This study examines the opportunities in the international carbon market to commercialise coal offsets from the forest economy for compliance schemes and the voluntary market within carbon-neutral and economic diversification strategies using Colombia as a case study due to the importance of coal for the country’s economy and its position as a producer. Consideration is given to opportunities in the international carbon markets that can serve as an instrument to decrease global greenhouse emissions. In recent years, the two modalities (compliance and voluntary) of carbon markets have been growing. To the extent that more drastic policies are generated against emissions and the price of credits and/or offsets, the market price of a credit is above US$20. It is estimated that credits based on nature and generate co-benefits will have the greatest commercialisation potential. In this regard, Colombia has multiple possibilities that could generate a competitive advantage when connected with the commercialisation of carbon. Country-level analyses indicate that the Colombian neutral coal industry has great potential among the regions and countries studied when considering the objectives of the established emissions trading scheme, which in most cases includes the electricity generating sector with a maximum of compensation. Conservatively, this could generate demand for Colombian neutral coal of 5%–10% of the credits and/or required offsets. In the voluntary market, the expectations are positive since many companies that use coal as an input and/or that rely on emission reduction objectives could opt for this strategy to enjoy the co-benefits that this innovative way of marketing coal offers. Colombian carbon neutrality has potential both in the voluntary and regulated carbon markets; efforts could start in the voluntary market and then carry out specific negotiations with countries that have a regulated market. In addition, including projects based on nature, especially reforestation and REDD, will be very beneficial since this sector is expected to experience the greatest growth in the creation of bonds. In addition, with the new rules of the COP26, there will be greater security and certainty in integrity and accounting issues, will be positive for the carbon neutral and economic diversification strategy. Furthermore, how the agreements are implemented to identify opportunities and strategies in their implementation should also be monitored. These elements will be fundamental in the analysis of carbon neutrality strategies in Colombia.