Carbon markets have a long shot at redemption
- Media Manager
- Jan 18, 2024
- 1 min read
Reuters
Written By: George Hay
Published: January 18th, 2024
The United States has grand plans for carbon markets. Washington’s idea, opens new tab for an Energy Transition Accelerator (ETA) targets one of climate finance’s biggest challenges – the need, opens new tab to increase clean energy investment in the developing world excluding China sevenfold by the early 2030s, to $1.9 trillion annually. John Kerry, U.S. President Joe Biden’s outgoing climate envoy, has a vision of a workable, large-scale market for emissions trading. It looks promising on paper, but plenty needs to go right for it to work.
Carbon markets involve buyers eager to acquire the right to emit an extra tonne of carbon dioxide from sellers able to restrict or absorb emissions. These schemes usually connect carbon-intensive companies from rich countries, like oil group Shell (SHEL.L), opens new tab, with poorer states that have carbon-absorbing assets like rainforests.
They come in myriad forms. “Compliance” carbon markets like the European Union’s Emissions Trading System (ETS) are regulated, and often involve governments mandating, opens new tab how much companies can emit and then forcing them to acquire credits for the right to do so beyond that level. “Voluntary” carbon markets are largely unregulated. They tend to start with projects like forestry preservation that establish a baseline level of emissions that would have occurred had the project not existed. Any reductions beyond that baseline produce credits which companies that decide to offset their own carbon can buy.
