The value of the global carbon market surged to $851 billion!
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Introduction - global carbon market
As per analysts at Refinitiv, the Global Carbon Markets underwent a remarkable 164% growth in 2021, reaching an impressive $851 billion.
The European Union's Emissions Trading System (EU ETS) holds a substantial value of 683 billion euros (about $769 billion). Having been in existence since 2005, the EU ETS is widely recognized as one of the longest-standing global carbon market worldwide.
Furthermore, the North American markets have expanded by 6%, indicating a valuation exceeding half a billion dollars within this specific region alone.
What Are Global Carbon Markets?
Global carbon market offer a mechanism for companies, collectives, or nations to curtail their own greenhouse gas (GHG) emissions. These tools also enable those emitting below-average levels of climate-altering gases, like CO2, to procure "credits" from projects encompassing reforestation and other ecologically advantageous endeavors. These credits symbolize proactive steps taken for the sake of our planet's future generations, ensuring that today's emissions do not imperil tomorrow.
What sets global carbon market apart from the voluntary carbon market (VCM)?
Voluntary global carbon market are precisely what their name implies – voluntary. Hence, individuals or entities make the voluntary decision to acquire "carbon credits" for the purpose of emissions reduction (without being subject to regulatory mandates).
A recent Visual Capitalist report underlines the substantial growth potential of this investment avenue. Having reached a valuation of $1 billion USD last year, it appears almost certain that forthcoming figures will surpass this mark. This projection is influenced by the increasing corporate consciousness surrounding climate change and the growing recognition of additional environmental challenges, such as pollution stemming from unsafe industrial operations, that also necessitate solutions.
What is causing the continuous rise in carbon prices?
Due to the EU's ambitious target of achieving a 55% emissions reduction by 2030, carbon prices have surged. They were relatively manageable in 2020; however, a significant shift occurred in July 2021 when permits reached their price ceiling. Since then, regardless of whether one is considering coal or gas-powered electricity generation, prices have remained consistently above this level.
The primary analyst specializing in sustainable development and its correlation with climate change posits that these escalating expenses are likely to persist without a defined endpoint. The rationale behind this projection is the necessity for a gradual approach to implementing changes, preventing excessive harm to our planet while collaboratively seeking novel solutions. Analysts concur that the trajectory of rising prices is likely to continue.
Conclusion
In conclusion, all indicators point to a monumental surge in the carbon credit market over the upcoming years. With global efforts intensifying to combat climate change and reduce carbon emissions, the demand for carbon credits is poised to skyrocket. Governments, corporations, and individuals are increasingly recognizing the urgency of mitigating their environmental impact, and carbon credits offer a tangible pathway to achieving these goals. As sustainability becomes a top priority, the market's growth is driven by a shared commitment to securing a cleaner, greener future. This surge not only reflects financial opportunities but, more crucially, a collective determination to safeguard our planet for generations to come.
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