Carbon Trading
How the world measures and trades carbon
Scientific measuring for concentration of greenhouse gases in the air is done in “ppm” (i.e. parts per million). Currently, our planet has a level of 420 ppm, which is considerably higher than the previously proven peak of 403 ppm, at which time humans did not exist, because this number can't go up indefinitely, carbon budget concepts have been introduced.
In 2021, the residual global carbon budget to remain within 1.5°C global warming was estimated by IPCC. By emitting 400 billion tonnes of additional CO2 we would already have more than 33% chance of exceeding the 1.5º safety limit required to ensure tolerable climate protection. At the current emissions rate, the global carbon budget will likely run out by the end of 2030.
As the world begins to get to grips with carbon emissions, two types of carbon markets have emerged: one that is regulated (e.g., the EU ETS) and one that is not regulated (Voluntary carbon offsets).
Voluntary carbon offsets: These programs operate on an international basis and remain mostly unregulated. While attempts have been made to standardize quality criteria, both pricing and quality vary significantly from one project to another. Offsets traded on the voluntary carbon market encompasses projects which include planting forests, sustainable development and carbon capture amongst many others. Voluntary offset credits remain non-capped and can no longer be used in compliance markets.
Compliance carbon allowances: these are fully regulated and mandatory. By far, the most prominent one in the world is the European Union Emission Trading System (EU ETS).
The current developments of initiatives for Carbon around the globe can be seen on the World Bank Carbon Pricing. (Worldbank, 2022) or the Climate Warehouse.
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