The Carbon credit market can effectively be split into two categories: Voluntary Markets and Compliance Markets.
Compliance Markets are where the buying and selling of credits occur in industries regulated by emission trading systems (ETS) in regions where it is required by law to offset carbon emissions using carbon credits. Transactions in the Compliance Markets totalled approximately US$261 billion in 2020. The Voluntary Markets pertain to companies or individuals that offset their carbon footprint without non-compliance fines or reserve pricing.
Increased global focus on decarbonisation
The Race to Zero Campaign spearheaded by the United Nations is a global coalition of thousands of businesses and hundreds of cities that have committed to being net-zero by 2050. The members of the campaign combined cover almost 25% of global CO2 emissions and over 50% of global GDP.
Governments, NGOs, consumers, regulators, shareholders, consumers and even employees are pressuring companies to decarbonise. The Net Zero Asset Managers Initiative, for example, comprises an international group of asset managers that are focused on investments that aim to reach net-zero greenhouse gas emissions by 2050 or sooner. 128 asset management companies with control of a combined US$43 trillion in assets have signed up as of now, including BlackRock and Vanguard.
Challenges to decarbonisation
With the increase of companies working on net-zero pledges, the realities of decarbonisation at the company level are becoming a lot more pressing. The initial step of the process is to calculate the company’s carbon footprint in great detail. Phases of planning and implementing changes at an operational and supply chain level can then take place with the aim of reducing carbon footprints.
With technologies and efficiencies alone, it is difficult for many companies to reduce their carbon emissions. New and even next-generation technologies would be needed in industries like mining, construction and refining for carbon emission reductions to actually take place. Voluntary markets could play a key role in these industries in achieving net-zero goals.
Next steps
It is extremely important that companies take accountability for their carbon emissions and look to voluntary markets to offset these emissions. The voluntary markets are funding projects that sequester carbon and prevent further carbon from being released. These markets are also at the forefront of innovation for emerging climate technologies.
With DGB seeking to rapidly accelerate the reforestation of the earth, and providing the market with carbon credits as we do so, there has never been a better time to get stuck into the green revolution and turn your business carbon neutral.
