Carbon market 'Mantra' and whether it can support net zero carbon negative climate goals.
There is a growing ambition among business leaders’ commitments to reduce global greenhouse-gas (GHG) emissions. Even as this happens; there is an emerging market that can help to achieve them by supplementing companies’ efforts to reduce their own emissions. This is the rapidly growing market for voluntary carbon credits.
According to the annual Refinitiv Carbon Market review, the total value of the global carbon market grew by 20 percent in 2020, despite the fact that emissions dropped by 7 percent. It is projected we might foresee the trend of high traded values and volumes increase in 2021, with market players expecting a tightening of the EU ETS required to meet the new 2030 climate target.
However, there are doubts whether it will be a reality as the EU Emissions Trading System (EU-ETS) and the UN's carbon offsetting scheme, Clean Development Mechanism (CDM) considered as the most critical carbon markets so far have not yielded any fruits, yet, new carbon markets based on these schemes are being planned in both developed and developing nations.
The ideologies of carbon markets were established in the 1997 Kyoto Protocol, but to date there have been few, if any, measurable reductions in greenhouse gas (GHG) emissions that can be attributed to these measures.
On the sideline, in a recently held Davos Agenda 2021, Annette L. Nazareth Senior Counsel at Davis Polk and a Commissioner is optimistic they can still build a well-functioning voluntary carbon market that can support net zero carbon negative climate goals.
She said there is a new blueprint that has a set of six topics for action. It contains 20 underlying recommendations that will materially enhance the market to make it more robust and transparent. It will also increase the quality and environmental integrity of carbon and their use.
“Each of these topics for action and recommendation are important levels, but to me the three most critical elements that will really help us achieve our goals are quality, governance and legitimacy,” She said.
I strongly feel there are still underlying issue that must be addressed in order to achieve the zero emissions. Carbon market would not suddenly work better if the carbon price was right. First, concern is the link between carbon markets in the developed and offsetting in developing countries. They should also address corruption and non-transparency that has infested the carbon market.
According to the annual Refinitiv Carbon Market review, the total value of the global carbon market grew by 20 percent in 2020, despite the fact that emissions dropped by 7 percent. It is projected we might foresee the trend of high traded values and volumes increase in 2021, with market players expecting a tightening of the EU ETS required to meet the new 2030 climate target.
Under Article 6 of the 2015 Paris Agreement on climate change, if one country pays for carbon emissions to be reduced in a second country, the first country can count those reductions towards its own national targets. If done right, analysts at the Environmental Defence Fund (EDF) say this international emissions trading could almost double global emissions reductions between 2020 and 2035.
