Concordia 2025

Concordia Winter 2024

14

Carbon Markets Marcus-Alexander Neil (2001–2008) answers the question ‘Carbon trading and offsets — what good do they do? Discuss.’

I was relatively confident that Mr I have left MTS, but the following brief reflections on the carbon markets suggest otherwise. Before discussing the role carbon markets play in the global effort to achieve the goals set out in the Paris Agreement (namely net-zero by 2050 and limiting global warming to 1.5 o C), it is important to establish our progress to date and the potential consequences of failing to meet these targets. Ahead of the 2024 United Nations Climate Change Conference in Baku, Azerbaijan (COP29) in November, the UN Environment Programme shared its 2024 emissions gap report highlighting a ‘massive gap between rhetoric and reality’. With the next round of Nationally Determined Contributions (NDCs) due for submission in early 2025, the report calls for a serious raising of ambitions: countries must cut 42% of greenhouse Rippier and Mr Taylor no longer had the right to set me homework now

gas (GHG) emissions by 2030 and 57% by 2035 if the world is to get on track for 1.5°C. A failure to increase ambition and delivery would put the world on course for a temperature increase of 2.6-3.1°C over the course of this century, leading to catastrophic impacts to the environment and human health (World Health Organisation, 2023). It remains technically possible to get on a 1.5°C pathway, with solar, wind and forests holding real promise for sweeping and fast emissions cuts. However, it will require strong private sector action and a minimum six-fold increase in mitigation investment. G20 nations, particularly the largest-emitting members, will need to do the heavy lifting. In practice, this equates to consumers, corporates and governments adopting practices which avoid, reduce or capture carbon and other GHG emissions, either voluntarily or in accordance with government policies and industry

regulations. Increasing investment in renewable energy generation, reducing dependency on fossil fuels, increasing the efficiency of energy systems and so on. However, put bluntly, the private sector is ill-equipped and not incentivised to take these steps unless GHG emissions are given a monetary value, so that the cost of inaction (money out) or benefits of effective action (money in) can be included on the balance sheet, and this is why carbon markets are so important. There are two sides to the carbon market, but both are built on the same principle: one carbon credit, or emissions allowance, is equivalent to one tonne of CO2 equivalent (CO2e) - a metric measure used to compare the emissions from various GHGs on the basis of their global-warming potential. By assigning a monetary value to emissions, the carbon market sets a price for these negative externalities which may otherwise be ignored.