What are the Carbon Markets?
- Participation required by certain industries by regulation. A cap is set on total emissions and the cap is reduced over time in order to reach climate goals.
- Carbon allowances are allocated and/or auctioned by the regulator and covered entities must retire enough allowances to cover their emissions.
- Prices driven by market fundamentals, regulatory factors and government imposed price controls.
- Examples include the European Union Emissions Trading System and the California Cap-and-Trade Program.
- Participation is on a voluntary basis by individuals, corporations and organizations that want to offset their emissions.
- Carbon credits are created by projects that avoid, reduce or remove emissions beyond a “business-as-usual” scenario.
- Prices driven by market fundamentals and project specific attributes.
- The market for voluntary carbon credits hit a record US$1 billion in 2021 and could grow to a US$50 billion a year market by 2030, according to McKinsey.
Carbon Offset Project Types
REMOVAL / SEQUESTRATION
Carbon capture and storage
What Defines a Quality Carbon Credit?
There are non-profit independent carbon standard organizations that set rules and requirements for carbon offset projects. They are responsible for the validation and registration of projects and the verification of reductions and removals of GHGs prior to issuing credits. Their registry systems track the issuance, transfer and retirement of voluntary carbon credits. These standards include the Verified Carbon Standard administered by Verra, the Gold Standard, the Climate Action Reserve and the American Carbon Registry.
Criteria for Voluntary Carbon Credits
The emissions reduction or removal should be monitored, reported and verified by a credible third-
party verification system.