How a certificate is priced, in a market with no published index

The first question anyone asks about certificates is price. The honest answer is this: there is no published price index for transport insetting certificates. Trades are privately negotiated.

That does not mean prices are arbitrary. The structure is public.

The price is rooted in the extra cost of the fuel

Two cases in the SBTi evidence synthesis show it.

SAF certificates are "designed to cost the price premium for SAF over conventional jet fuel, minus any government incentives" (p.30).

For biomethane guarantees of origin, the average certificate price covered 27% of production cost in the UK and 55% in Germany (p.30).

So what moves the price

A certificate is not priced at the market value of the reduction itself. It is priced at how much of the extra cost of using low-emission fuel the market agrees to carry.

What that means is clear enough. The production cost of the fuel, the incentive regime in that country, and how many buyers there are — those three move the price. None of them reduces to a single number called "the price of a tonne of carbon".

What to ask before the price

There are things to establish first. Which fuel this certificate came from, what incentives exist in that country, and who the issuer and the registry are.

The price is set on top of those answers. The second report in this series takes that structure apart.

This article expands one section of LCS EAC special report 1, Do the Reductions You Buy Become Yours? The full report works from the SBTi Corporate Net-Zero Standard V2.0 and SBTi Evidence Synthesis Report Part 2 as primary sources, with the printed page number given for every quotation.