News
Analysis
7x24
Quotes
Economic Calendar
Data
- Names
- Latest
- Prev.
Columns
Trending Topics
Daily News
To quickly learn market dynamics and follow market focuses in 15 min.
Central Bank
Inflation, exchange rates, and the economy shape the policy decisions of central banks; the attitudes and words of central bank officials also influence the actions of market traders.
Traders' Opinions
View trading ideas and learn trading strategies.
Forex
Money makes the world go round and currency is a permanent commodity. The forex market is full of surprises and expectations.
Recent Searches
Trending Searches
View All
No data
Global Carbon Markets Face Upheaval as Nations Remake the Rules
Summary:
The US$2 billion market for carbon offsets is heading for a massive reset, as a growing number of sovereign governments announce their intention to tax, regulate or restrict trade in credits generated within their borders.
The US$2 billion market for carbon offsets is heading for a massive reset, as a growing number of sovereign governments announce their intention to tax, regulate or restrict trade in credits generated within their borders.
The details vary, but from Indonesia to Kenya to Honduras, the goals are the same: Governments want to retain more of the benefits of emissions-reduction projects, whether as revenue or as credit toward their own national climate goals.
"If you are a developing country and you have the right kinds of project opportunities, you've got a golden goose," said Mark Lewis, head of climate research at Andurand Capital Management.
For countries with dense rainforests, mangrove swamps or other natural carbon sinks, carbon credits are increasingly considered alongside valuable minerals and metals like gold, lithium or copper.
"Commodities markets have created the precedent," said Samuel Gill, president and co-founder of Sylvera, a carbon research and ratings firm. "It is almost inevitable that nations come to see and treat carbon as any other national resource."
That wake-up call has been prompted in part by a growing awareness that, as of now, governments and local stakeholders might receive just a tiny slice of the revenues made by foreign project developers, said Pablo Fernandez, chief executive of Ecosecurities, a project developer and investor.
For example, most of the €100 million in proceeds from one of the biggest offset projects, a forest-protection site called Kariba in Zimbabwe, were accrued by the Swiss developer South Pole and its Guernsey partner Carbon Green Investments. In Mexico, BP paid rural villagers a small fraction of the market value of the credits generated on their forest land, according to a 2022 Bloomberg Green investigation.
"I'm not saying it's the pattern of the market, but we do have some projects that are badly designed and badly executed," Fernandez said. "That leads to these situations."
At the same time, carbon credits have new value for emerging markets. Under the 1997 Kyoto Protocol, wealthy countries had emissions targets and could buy credits from projects in developing countries to meet them. The 2015 Paris Agreement introduced targets for all, developing countries included, effective from 2020.
This means governments now view the units not just of a source of revenue, but as a tool to meet their international obligations. "The Paris Agreement acknowledges emissions as sovereign liabilities," said Finn O'Muircheartaigh, director of policy and markets at BeZero Carbon, a research and ratings firm. "Countries are now recognising they also have sovereign assets, which are their ability to reduce carbon or sequester carbon."
The new sovereign trading market is being set up by the United Nations, with an accounting framework that prevents the same credit from being applied to more than one country's climate goal. That means countries will have to decide if and when credits produced within their borders will be made available for use by others and when they'll be used for national goals.
Though the details are still being fine-tuned, some countries have already begun to strike deals to ensure supply. More than three quarters of countries say they plan to or are considering using the UN carbon market to meet their targets, known as "nationally determined contributions".
"Adjusting the amount of supply going to NDCs, rather than offset markets, has big implications," according to BNEF , which predicts the voluntary offset market could reach US$1 trillion by 2037.
One of those implications will be regulatory change and, at least at the beginning, inconsistency from one country to the next. Last month, Zimbabwe announced its intention to retain 50% of carbon revenues generated there, effective almost immediately. Kenya is debating legislation that would provide local communities a 25% cut. In October, Tanzania introduced new rules governing the revenue split, but developers say they are still waiting for specifics.
Elsewhere, Papua New Guinea suspended new deals while it worked on regulation. Honduras put a moratorium on the sale of forest-based carbon credits, and Indonesia imposed conditions on the export of carbon credits.
Meanwhile, Malaysia has said it won't limit sales of offsets abroad. Ghana, often lauded for its regulatory clarity, recently struck a deal to sell credits to Switzerland. Possibly one of the biggest impacts on the market, however, will be China — the largest supplier of offsets — which is readying a revamp of its domestic voluntary market.
The Paris Agreement was "revolutionary" in the way it empowered every country to set its own targets and manage its own market, Fernandez said. But that is a bumpy and inconsistent process, he added: "Today, we are living with the problem of this."
Investors say they welcome moves to create clarity, stability and predictability in the carbon market. "Improved regulation — and the greater certainty that comes with it — represents progress," said Ana Haurie, chief executive of Respira International, a carbon finance firm. "By creating certainty around the cost, the market can determine whether it's a price worth paying."
The emissions trading industry welcomed the new regulatory frameworks that would bring more certainty for investors but warned policymakers not to be overzealous.
"The new frameworks and the degree of government interventions will determine how attractive individual countries are for investors," said Andrea Bonzanni, the director of international policy at the International Emissions Trading Association. "If we make things too difficult, there will be no international carbon markets."
Investors will pick projects in countries which offer the best risk-to-reward ratio, according to Benedikt von Butler, portfolio manager at Evolution Environmental Asset Management LP. It's "in a host country's self-interest to minimise political risk to attract more investments, which will also generate revenues for governments," he said.
Source: Bloomberg
Risk Warnings and Investment Disclaimers
You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or strategy, or any other product is suitable for you based on your investment objectives and financial situation.
Quick access to 7x24
Quick access to more editor-selected real-time news
Exclusive video for free
FastBull project team is dedicated to create exclusive videos
Follow more assets
You can add more assets to your watchlist to follow more real-time quotes.
More comprehensive macro data and economic indicators
More comprehensive historical data on indicators to help analyze macro markets
Member-only Database
Comprehensive forex, commodity, and equity market data
- Economic Calendar
- Events
- Holiday
BANKS ACT (%) PREV (%) CPI (%)
SYMBOL
LONG SHORT
English
English
العربية
繁體中文
简体中文
Bahasa Melayu
Bahasa Indonesia
ภาษาไทย
Tiếng Việt
Copyright © 2023 FastBull Ltd
Home News AI Signals Analysis Columns 7x24 Economic Calendar QuotesData WarehousePro User Agreement Privacy Policy About Us
Risk Disclosure
The risk of loss in trading financial assets such as stocks, FX, commodities, futures, bonds, ETFs or crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.
No consideration to invest should be made without thoroughly conduct your own due diligence, or consult with your financial advisors. Our web content might not suit you, since we have not known your financial condition and investment needs. It is possible that our financial information might have latency or contains inaccuracy, so you should be fully responsible for any of your transactions and investment decisions. The company will not be responsible for your capital lost.
Without getting the permission from the website, you are not allow to copy the website graphics, texts, or trade marks. Intellectual property rights in the content or data incorporated into this website belongs to its providers and exchange merchants.