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Carbon project developer financing levels on track with last year

Published: 24 Aug 2023
Last updated: 29 Aug 2023

Investment in carbon project developers and portfolios continues to experience strong momentum in 2023, according to Abatable’s analysis of carbon market financing and deals data from the first half of this year.

We estimate that total carbon project developer financing reached an estimated $8.1bn in H1 2023 across 109 deals tracked. This level of financing is in line with the same period in 2022 – a record year for funding announcements in the market.

The positive developer financing trend is in contrast with the broad slowdown in carbon credit retirement activity this year.

Key H1 2023 insights

More, albeit smaller, deals

The number of funding deals reached 109 in H1 2023, which compares to a total of 70 deals for the entirety of 2022. This means 2023 is already set for a record high in terms of number of deals (see chart below).

However, the median investor check size has significantly dropped – from $50mn in 2022 to $6.2m in H1 2023. This is the result of a smaller number of carbon fund closing announcements relative to last year and an increased number of VC-led engineered removals rounds, with the latter tending to be smaller in terms of equity.

The dispersion of check sizes has narrowed significantly so far in 2023. Most deals have been in the range of $1mn to 40mn, with very few exceptions above $50mn. This suggests the voluntary carbon market is still maturing to welcome large institutional capital funding injections.

Graphic showing the total announced carbon developer funding and number of deals from 2021 to 2023
The number of carbon project developer funding deals is already up this year on 2022, while the total amount of funding is in line with the same period in 2022. Chart: Abatable

Advancing innovative solutions

Whilst nature-based solutions continue to dominate capital influx, accounting for over 50% of H1 2023 total investment, engineered removals also saw growing popularity with organisations and investors pledging their intentions to scale up these solutions (see chart below).

Engineered removals increased their share of total funding from 9.3% in 2022 to over 14% in H1 2023, scoring over 66 deals out of the total 109 recorded so far this year.

Direct air capture (DAC) has taken a notable portion of funding within the engineered removals category, likely as a direct outcome of the US’s Inflation Reduction Act which is prioritising carbon capture investment.

A breakdown of the split of total developer funding announced by project type
Engineered removals have seen an increase in funding in H1 2023. Chart: Abatable

A shift away from cookstove investments

Investment in low-emission household devices and cookstoves has seen a marked decrease from previous years (see chart below). Only four deals were announced in H1 2023, compared to 14 deals announced last year. There has been a pause on new cookstove project creation due to a large expected supply coming to market, with potential price compression expected.

Split of total carbon project developer deals announced by project type
While engineered removals saw a large increase in deals in H1 2023, there was a marked decrease in cookstove deals. Chart: Abatable

Stay tuned for our full-year roundup

At Abatable we continually track carbon project developer funding activity and deals. We will report on how the rest of 2023 plays out in our annual State of the Developer Ecosystem report at the end of the year – so watch this space.

Our analysis informs our understanding of voluntary carbon market investment trends, including the distribution of future supply in terms of project types and target regions. Get in touch to learn more.

Please note: Only deals which saw the direct involvement of carbon project developers or investors have been included in our analysis, deals tracked do not include procurements done via exchanges. Where funding totals were not disclosed these were estimated as a product of volume and project type using Abatable’s internal price benchmarks.

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