The Secretary General of the International Energy Forum, Joseph McMonigle has announced that carbon markets are expected to play an important role in achieving climate, energy security, and sustainable development goals by boosting the efficiency of energy transitions and raising money for clean energy projects.
This disclosure was made by McMonigle while speaking at the launch of a new report entitled “The Role of Carbon Markets in Transitions”, which focuses on the potential of carbon markets to accelerate the transition to net zero carbon emissions and universal access to affordable and reliable energy under the Paris Agreement and Sustainable Development Goals, according to Businessday.
He said “Carbon markets play an important role in aligning resources to achieve our global climate, energy security, and affordability goals.
“But they are at an inflexion point. With stronger international collaboration and smart regulation, they can raise billions of dollars for clean energy projects, especially in the developing world, that would otherwise not get off the ground.”
In the report, the state of play in mandatory compliance markets and the rapidly emerging voluntary carbon market, where companies often offset emissions by financing projects that remove or avoid producing CO2, especially in other countries is reviewed.
The report calls on governments to make carbon markets a win for consumers and producers, noting that fostering a coherent policy approach, standardisation, transparency, knowledge sharing across borders and digitisation, can address market fragmentation and carbon credit risk.
The potential of carbon markets to generate investment for carbon capture, utilisation, and storage (CCUS) technologies, is also highlighted. Despite their ability to significantly decrease CO2 emissions and provide a substantial supply of credible carbon credits, CCUS projects are mostly excluded from the scope of incentives in the carbon market.
“The incentives provided by carbon markets for CCUS are expected to facilitate the broader deployment of this technology and a further reduction in associated costs,” the report said.
The report adds that carbon credits can also be used to enhance the economic value of Clean Hydrogen production, as well as technologies that are based on CCUS. In addition, innovation in low carbon intensity materials which could one day transform industries relying on concrete, steel, plastic, ammonia, and steel can be financed by the proceeds of carbon markets.
For countries that are yet to introduce mandatory compliance carbon markets, “voluntary carbon markets represent an initial step in addressing both national and international climate challenges,” the report says.
“Countries and businesses may transition into compliance markets or use voluntary carbon markets for equivalent effect depending on performance and circumstances,” it adds.
McMonigle called on governments to conclude an agreement concerning Article 6 of the Paris Agreement, which lays down a framework for international trading in carbon credits and is regarded as essential if we are to meet our domestic emission reduction targets.
“Agreement on Article 6 is key to unlocking the potential of international carbon markets and we hope to see more progress at COP29 in Azerbaijan,” he said.
