This session will discuss the implications of non-standardization in the carbon credit trading market, an overview of the market, size, regulatory (compliance) and voluntary frameworks, and a comparison of traditional versus blockchain technology solutions.
The UN’s goal 13 is to combat climate change and its implications. Achieving Net-zero is one method to combat climate change, either through emission reduction, or through carbon credit capture purchases. There are over 50 different carbon credit trading platforms globally. The value of traded global markets for carbon dioxide (CO2) permits reached a record 850 billion euros ($909 billion) in 2022. The carbon credit trading market is currently valued in 2022 at USD 2386.8 million, forecasted to grow to USD 12412.8 by 2028 a growth rate of 29.87% (Carbon Credit Trading Market" Insights 2023).
However, there is no global standard for carbon credits. At the highest level there is bifurcation in the market into compliance and voluntary markets. The compliance or cap and trade market is further divided into over 30 participants, in 2021 the value of those markets reached over $850 billion and covered close to a fifth of global greenhouse gas emissions. The compliance market was initially dominated by the European Union Emissions Trading System (EU ETS), in 2021 recently influenced by China’s national emissions trading scheme (ETS). The voluntary markets are bifurcated between trading platforms and over-the-counter (OTC) trading. The voluntary market was worth about $2 billion in 2021, and BCG estimates it will grow to $10 - $40 billion by 2030.
Standardization can be achieved through a blockchain based carbon credit trading platform, such as the World Bank’s International Financial Corporation’s partnership with CHIA compared with the divide of traditional carbon credit platforms or the over-the-counter trading. The implications for carbon credit standardization is an innovative way for capital markets to fully engage in carbon credit trading in a transparent, secure, fair, and beneficial manner.
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