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Mark Carney to Oversee Carbon Offset Market

Updated: Jan 17, 2021

With more and more businesses setting net zero emissions targets, the voluntary carbon market needs stronger quality control to scale up, says UN special envoy.

As demand for carbon offsetting grows to help companies meet their climate goals, Mark Carney - the Canadian, and former Governor of the Bank of England - is driving efforts to scale up the voluntary carbon market, while improving its environmental integrity.

He's almost certainly the right man for the job. In an interview with The Economist in April, he declared that once this war against an invisible enemy (Covid-19) is over, our ambitions should be bolder - nothing less than to make “a fit planet for our grandchildren to live on”. So, his heart is in the correct place to oversee the vital role that carbon off-setting will play in solving the climate crisis.

With a recent surge of carbon neutrality pledges, many businesses around the world are looking to offset the emissions they cannot cut. This means financing projects, usually in developing countries, that deliver verified emissions reductions. These might come from renewable energy, energy efficiency, waste management, tree-planting or carbon removal technologies.

Demand for carbon credits has risen rapidly in the past two years, with the volume of emissions reduction claimed doubling between 2017 and 2020. It is expected to continue to soar in the near future as companies look for ways to meet their newly set goals.

“It’s incredibly important that the ‘net’ in net zero, the offset is credible, verifiable, transparent and is preserving that precious and very limited carbon budget,” Carney, the UN special envoy for climate action and finance, told the Green Horizon finance summit last week.

Today, the voluntary carbon market is “opaque, cumbersome and fragmentated” and “struggle[s] with low liquidity and scarce financing”, Carney said. In 2019, just over $300m worth of trading took place on the voluntary market “when these projects should be measured in the tens of billions dollars per year,” he added.

Carney convened a taskforce in September to design a blueprint for scaling up the market into a transparent, verifiable and resilient emissions trading mechanism, which is expected in January 2021.

The initiative chaired by Bill Winters, group chief executive of Standard Chartered, and sponsored by the Institute of International Finance, published its first set of 17 recommendations, which it opened to consultation until 10 December.

The taskforce found efforts to upscale the market will need to be “significant”, estimating voluntary offsetting would need to grow at least 15-fold between 2019 and 2030 to support levels of investments consistent with limiting global heating to 1.5C - the upper goal of the Paris Agreement.

Demand for voluntary carbon credits is expected to exceed 88 million tonnes of CO2 in 2020. That “is still notably short of what is needed to support net zero [emissions targets], estimated to be at least 2 gigatonnes of CO2 per year by 2030,” the taskforce found.

On the supply side, “there is no shortage,” said Annette Nazareth, Partner at Davis Polk and the taskforce’s operating lead. And while demand has fluctuated, there is a groundswell of interest among companies, including small and medium-size businesses, added Tim Adams, president and CEO of the Institute of International Finance.

At scale, the voluntary carbon market could “create an enormous green investment opportunity much of which, if not most of which, will flow to emerging and developing economies bringing vital capital flows and investments at the time when the transition is imperative,” Carney said. “In order for any of that to happen, we need a functioning and professional market.”

The Carney taskforce emphasised buying credits was no substitute for a company cutting its own emissions and called for stronger quality control.


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