The article in the url below provides an update on how the market for carbon offsets has increased markedly in recent years (including dramatic graphs, like this):
"Such is the exuberance for carbon offsets that the consultancy McKinsey & Co. estimates a voluntary trading market like the one being organized by two financial heavyweights, Mark Carney and Standard Chartered CEO Bill Winters, could be worth as much as $50 billion in 2030, up from just $300 million in 2018. Carney, the former governor of the Bank of England, has put the figure as high as $100 billion by the end of the decade."
For more on this new voluntary market, see here, although many of the same issues with offsets (such as verification and accounting) remain largely unsolved (see Strategic CSR – Trees). In spite of this, three quotes from this article caught my eye. The first emphasizes the woeful inadequacy of the current market for carbon offsets, irrespective of its recent popularity:
"The vast majority of the offsets sold today cost less than $5 for each ton of carbon dioxide removed from the atmosphere. In many cases, the price per ton can be as low as $2."
The second quote shows some of the fascinating challenges with building a market where any offset can be traded on a transparent basis from a common reference point:
"Trees that store away carbon dioxide for five years before being burned in a wildfire are providing a fundamentally different service than a ton of the gas buried deep underground for thousands of years. Climate change is a problem of cumulative amount of greenhouse gases in the atmosphere, and many experts argue that the longer a ton of CO₂ can be stored away, the more valuable it should be. That might make it hard to set a standardized price."
The third quote questions whether the voluntary nature of the proposed market will undermine its chances of achieving its stated goals:
"Buyers and sellers are incentivized to trade numbers on ledgers, but how can the rules incentivize verification? Will all the offsets trading hands in the new market truly lower greenhouse-gas emissions? As one taskforce participant we spoke to put it: Either the taskforce recommends the creation of a global regulator, or it risks the same failure that has met previous attempts."
Take care
David
David Chandler
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Turning Carbon Offsets into Catnip for Commodities Traders
By Akshat Rathi
June 2, 2021
Bloomberg Businessweek
