The monthly series born from the collaboration between Carbonsink and ETicaNews returns to explore the rapidly evolving climate transition scenarios and emerging carbon issues in the world of politics, economics and finance
May 2022 – In 2021, the idea was born from a question: is carbon the new commodity of the 21st century? One year on, in the carbon sector many trends have strengthened, others have evolved, all at great speed and within a complex international scenario. There are so many developments that it is impossible to mention them all in this space. In future episodes we will continue to keep climate action and how it is changing the economy and finance on the radar.
For example, 2021 was a record year for science-based emission reduction targets. According to the latest data from the Science Based Targets (Sbti) initiative, the number of new companies committing to Sbt targets doubled in 2021, with more than a thousand companies with validated targets as of the end of 2021 and as many committed to the validation pathway. To date, Sbti companies (with approved targets) cover one-third of the global economy, equivalent to about USD 38 trillion. Hundreds of companies are going further and preparing a long-term strategy with a commitment to adhere to Sbti’s net zero standard.
Meanwhile, the Nasdaq is creating the world’s first index class dedicated exclusively to the pricing of removals (i.e. greenhouse gas removal techniques and technologies) and the London Stock Exchange has launched a consultation to create its own voluntary carbon market, which will catalyse the first listed funds to invest in mitigation and development projects.
The integrity and quality of carbon credits traded in voluntary markets become crucial, and the trend towards standardised monitoring and impact assessment metrics is gaining momentum.
On this front, the most important developments of the year are expected to come from the Integrity Council (Ic-Vcm), the independent governance body for the voluntary market created by Mark Carney’s Taskforce. Ic-Vcm aims to formulate the Core Carbon Principles (Ccps), new shared standards that will set the criteria for identifying high-quality carbon credits, helping to increase integrity and trust in the voluntary market and mobilise climate finance at scale. Financial trading platform Cme Group announced that it will launch Cbl Core Global Emissions Offset futures, and that these futures are intended to align with the Ic-Vcm Core Carbon Principles.
The sphere of regulated carbon markets (compliance markets) was also very dynamic in 2021 and the trend will continue in 2022, despite geopolitical complexities. From the European Ets to the US schemes, to the new Chinese market that has seen ups and downs in its first year, the main emission cap-and-trade mechanisms are growing and updating. After the adoption of Art. 6 of the Paris Agreement on the functioning of international emissions trading, reached at Cop26 in Glasgow, synergies between voluntary and regulated markets look increasingly concrete.
The coming months will be a mix of announced milestones and unpredictable developments. Follow the Carbon Age on Carbonsink and ETicaNews channels to keep up and distinguish the signal from the noise.
The Carbon Age is a monthly series exploring rapidly evolving climate transition scenarios and emerging carbon issues in the world of politics, business and finance.
The Carbon Age is produced by Carbonsink for EticaNews and is published monthly with the ET Climate 2022 newsletter.