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Nov 12, 2023Liked by Dr. Parva Chhantyal

It's great that you are highlighting the role of carbon markets in helping the world meet net zero targets. Unfortunately your article confuses two very different types of carbon market and I think that leaves the reader with the wrong impression.

Carbon credits are generated when companies voluntarily invest in projects such as reforestation that avoid emissions or capture carbon from the atmosphere. Yes, some companies have used the credits generated to offset their emissions elsewhere, but in the main those companies that are invested in the carbon credits also make an outsized contribution to cutting their own emissions. https://carbonrisk.substack.com/p/carbon-credits-a-license-to-decarbonise. The carbon credit market is only ~$2bn currently but has the potential to be worth multiple times that amount over the next few decades https://carbonrisk.substack.com/p/a-one-trillion-dollar-business.

Carbon allowances on the other hand are very different. They are part of regulated compliance markets introduced by governments to cap emissions. Obligated companies must buy carbon allowances to cover their emissions, and each year the cap goes down. They are a much bigger market than carbon credits. Covering about 18% of global emissions compliance carbon markets traded ~$900bn last year with the EU accounting for $750bn https://carbonrisk.substack.com/p/carbon-markets-are-going-global

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