A growing number of governments and companies are turning to carbon markets as a way to meet their commitments to tackle climate change. Over 90 countries and more than 1,500 corporations have pledged to reach net-zero emissions by mid-century. They now need to decide how to get there, and many are looking at carbon trading. Not only could carbon markets be an effective decarbonization policy, they also represent a significant opportunity: the total value of global compliance markets is in the hundreds of billions of dollars per year. While voluntary markets may only be worth around $1 billion right now, they could reach $245-546 billion by 2050, based on BloombergNEF analysis.
Still, carbon markets are complex, comprising numerous types of assets, mechanisms, systems and players. They are made all the more opaque thanks to a plethora of acronyms and jargon. The Carbon Knowledge Hub aims to support companies and governments by giving them the knowhow required to scale up their carbon market activities. The Carbon Knowledge Hub is a collaboration between the Indonesian Chamber of Commerce and Industry (KADIN) and BNEF. It is part of the Carbon Centre of Excellence – one of Indonesia’s B20 Legacy Programs, which aim to create a foundation for lasting, positive impacts across G20 countries. In addition to the Knowledge Hub, KADIN and its partners will organize best practice sharing sessions to support this initiative.
Key message
The Carbon Knowledge Hub is a public web platform that provides companies, policymakers and other players with the information required to understand compliance and voluntary carbon markets. It offers primers, factsheets, videos and other resources targeted at different levels of expertise, as well as interviews and articles by other companies already involved in carbon trading. The Carbon Knowledge Hub is part of the Carbon Centre of Excellence – a legacy program of B20 Indonesia.
Policymakers in both developed and developing countries are increasingly including carbon pricing in their strategies to meet climate targets. A compliance carbon market or tax aims to force polluters to cover the societal costs associated with their greenhouse gas emissions. But it can be tricky to design a carbon pricing policy that will both drive emissions abatement and accept the multiple stakeholders involved. Such programs can also be complex to navigate for companies, requiring new knowhow and capabilities.
Meanwhile, companies are considering whether to purchase voluntary carbon offsets to meet their sustainability goals. Buying credits can serve as an expedient alternative to reducing their own emissions, as it allows firms to make progress on their targets without shifting their business models or risking investments in non-viable technologies. Governments are also set to become big offset buyers, especially those with limited local emission-abatement opportunities.
The recent surge in corporate demand for offsets is creating opportunities for low-carbon project developers. This is especially the case for emerging markets, which have historically accounted for the lion’s share of offset supply.
However, the lack of a centralized voluntary carbon system has resulted in a maze of registries, credit mechanisms and types, and trading platforms. Prices for offsets also vary widely based on the project sector and location, together with nebulous factors that are hard to define and measure, such as project additionality. Meanwhile, a range of initiatives are seeking to bolster offsets’ reputation for delivering credible carbon abatement.
The Carbon Knowledge Hub offers primers, insights and resources targeted at different levels of expertise. In the Basics section, you can get to grips with the essentials of how carbon trading works, the participants involved and the current status of markets. If you see a word or phrase you don’t understand, go to the Dictionary.
More knowledgeable users can delve into the Factsheets to read about more advanced topics like the intricacies of the new global offset mechanism (known as Article 6), the varied factors determining the price of a voluntary offset, and contracting options.
The Stories section contains interviews, thought pieces, articles and reports by other companies and organizations already involved in carbon markets. The Hub also aims to build a community to help scale up carbon trading, bringing together a set of Partners committed to the development of carbon markets worldwide. To find out more about becoming a partner please email co2excel@bloomberg.net.
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