Cash & Liquidity ManagementInvestment & FundingVoluntary carbon market could provide “meaningful” contribution to net-zero

Voluntary carbon market could provide “meaningful” contribution to net-zero

Private sector initiative looks to standardise the voluntary carbon market to build credibility and avoid “greenwashing”

As regulators around the globe move towards mandatory ESG disclosures and climate stress testing, voluntary carbon markets could provide additional help in achieving Paris Agreement objectives.

“The voluntary carbon market could provide a modest but meaningful contribution, on the one-and-a-half-degree pathway to net zero,” said Mark Carney, UN special envoy on climate action and finance.

In remarks given during the launch of a second phase report on the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) he said that the voluntary carbon market could be between $30-$180 billion by 2030, the equivalent of 1-2 gigatons of CO2.

“Even the lower bound of this market is more than 10 times as large as the market was in 2020.”

The TSCVM, a private sector initiative, is looking to standardise and scale carbon markets. Having published a “phase two” report, proposing governance and core carbon principles, the taskforce hopes to have these in place by November coinciding with COP26.

Much of the investment in the carbon voluntary market is expected to go to the global south, Carney said.

“We think that up to 90 percent of the demand for these credits will come from companies in the developed economies, whereas 90 percent of the supply will come from emerging and developing economies.

“These credits can deliver co-benefits to societies, beyond emissions reduction, including for biodiversity and economic benefits for local communities and indigenous peoples,” he added.

A more credible market

Carbon markets are of course nothing new.

“This market has been around for decades,” said Bill Winters, Group CEO of Standard Chartered.

The main objective, according to Winters, is to build credibility and confidence – something that has held back carbon markets until now.

“The carbon markets are starting from a bit of a credibility deficit position. They’re associated with greenwashing… somewhat fairly associated but not completely.”

One way the TSCVM hopes to build confidence in the carbon market is to build a universal price for carbon. Globally, the price of carbon differs widely. In Europe, the price of carbon futures recently exceeded €50 per tonne, but in the US some marketplaces price carbon at below $10 per tonne.

“Present supply of carbon offsets and credits is of variable quality and some are excellent, many are weak. This lack of insurance is preventing the market from scaling up,” said Carney.

Winters agreed: “Having a single price or at least as close as we can possibly get to a single price that’s well-understood, well-respected and well-regarded builds confidence on both sides. Both the buyer and the seller of the credit are doing the right thing getting a good and fair deal.”

Overall, the voluntary carbon market is only a small part of the broader changes needed to reach net zero. Carney said even if the voluntary carbon market scaled up 15 times to 1.5 gigatons, it would still account for less than 10 precent of the 23 gigaton reduction of CO2 by 2030 (from 2018 levels) needed to reach the one-and-a-half-degree goal.

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