Carbon Markets

Carbon Markets are places where carbon emissions can be traded. By limiting the amount of emissions with a “cap” (at the state or corporate level), carbon emissions can be traded among entities (corporations or countries). The markets come in two flavors: voluntary (NGO run) and regulatory (government run).

BloombergNEF projects ran two market scenarios: a lax, voluntary only market or a removal only market. The former results in slow growth of carbon prices through 2050. The later results in a spike in carbon price to $200/ton, this environment resembles a carbon tax environment¹². S&P Platts produces as assessment of carbon markets. Control Period (CP) is a term to denote the various phases of the project, often shifts in scope or allocations³. Similarities in market definitions allows fungibility of credits across the marketplace, particularly some CDM related credits ³.

In Carbon markets, removal credits and community-based projects will likely trade at a price premium⁴.

Major Regulatory Markets

There are two excellent maps of ETS markets, both considered and implemented. One can be found at International Carbon Action Partnership and another at the Carbon Pricing dashboard by the World Bank.

Supranational

EU Emissions Trading System (EU ETS)
The Clean Development Mechanism
- UN program that oversees offsets from the Kyoto protocol

National

Subnational

California Cap and Trade program was established in 2006 by the Global Warming solutions act (AB 32) and is administered by the California Air Resources Board (CARB).
Regional Greenhouse Gas Initiative (RGGI) is a cap-trade initiative established in the North East in 2009.
Quebec Cap and Trade system was established in 2011³.
Alberta Technology Innovation and Emissions Reduction Regulation

Major Voluntary Standard Setters

Verra
American Carbon Registry - Winrock International
- Created a methodology and standard “Improved Forest Management Methodology for Quantifying GHG Removals and Emission Reductions through Increased Forest Carbon Sequestration on Non-Federal U.S. Forestlands” ⁵. The group (Columbia Carbon LLC, a subsidiary of CE2 Carbon Capital) that developed the standard does provide methodological references to how the standards were produced.
Climate Action Reserve
Gold Standard
Architecture for REDD+ Transactions

Project Developers

Setup projects that create carbon credits
- Carbon credits have a vintage (issuance) and delivery date (when the credit is available to the market)⁴.

Retail Traders

Exchanges

New York-based Xpansiv CBL created the Nature-based Global Emission Offset (N-GEO) for a standard credit.
Singapore based AirCarbon Exchange (ACX) created Global Nature Token for a standard credit.

References

Veronika Henze. Carbon Offset Prices Could Increase Fifty-Fold by 2050. Bloombergnef at https://about.bnef.com/blog/carbon-offset-prices-could-increase-fifty-fold-by-2050/ (2022).

Bullard, N. Carbon Offsets Trading Could Go Two Very Different Ways. Bloomberg.com (2022).

Borghesi, S. & Montini, M. The Best (and Worst) of GHG Emission Trading Systems: Comparing the EU ETS with Its Followers. Frontiers in energy research 4, (2016).

Favasuli, S. & Sebastian, V. Voluntary carbon markets: How they work, how they’re priced and who’s involved. at https://www.spglobal.com/platts/en/market-insights/blogs/energy-transition/061021-voluntary-carbon-markets-pricing-participants-trading-corsia-credits (2021).

Improved Forest Management Methodology for Quantifying GHG Removals and Emission Reductions through Increased Forest Carbon Sequestration on Non-Federal U.S. Forestlands. https://americancarbonregistry.org/carbon-accounting/standards-methodologies/improved-forest-management-ifm-methodology-for-non-federal-u-s-forestlands.