Access to the latest climate change science and policy is not just for the select few working in that space anymore. Climate change and its global impacts are no longer a small, niche area and carbon pricing is now a unifying language, but one that has not been straightened out yet. However, if more transparency and clarity can be added then consistency in carbon crediting will follow as will the resulting mitigation benefits.
Climate Week New York City is a big deal for environmentalists coming together to tackle the global climate crisis. Even more so this year given that the UNFCCC Conference of the Parties (COP) 26, which was scheduled to take place in December, has been postponed to late 2021. The wonderful upside to the global pandemic is that in many ways it has expanded accessibility to events, such as Climate Week NYC, to people like me who benefit from getting to join critical but often exclusive conversations.
I “attended”, virtually that is, two discussions related to carbon pricing. The first was titled: “Emerging Carbon Market Insights – Role of Liquidity & Price Discovery.” The main themes for this event were enticing investors and ensuring that quality carbon credits are available.
There were some questions around what emitters versus investors want in a growing carbon market. Emitters seek some price stability, although they would settle for more clarity. Investors do not want volatility yet are often searching for niche investment opportunities – which carbon is. They may not require stability but do need transparency to make their investments. The process of moving toward a more consistent price on carbon is what “price discovery” is.
To get a project investment-ready is a lot of work on the side of carbon creditors, but it is necessary to get commitments from the private sector. Without more transparency up-front investments may fall away which will dry-up the supply of carbon credits available. Investors are looking for “liquidity”, essentially for the rules of the carbon market to be clear enough and the market big enough that the movement (buying and selling) of carbon credits is free-flowing and easy. By getting through price discovery and having more liquidity in the carbon market the exchanging will be easier to do and more governments and companies will be motivated to participate.
The second virtual event I attended was called: “Getting to Net Zero – Raising the Ambition on Global Climate Action.” The conversation focused on private sector climate ambitions outside of the Paris Agreement. It was mentioned that over 1,500 companies have made net-zero commitments, but that without detailed transition plans and some internal and/or public accountability these commitments lack legitimacy. Despite the message that corporations can and plan to make significant changes over the coming decades the speakers expressed that this cannot be done in isolation. It is important for companies to have their carbon goals be discussed internally across all departments. There is also value in sectors banding together and a need for public policy to support and spur private action.
The speakers at this event mentioned that effective carbon pricing, both internally and externally, needs to be at a price significant enough to compel change in behavior not simply changes in accounting, and that the price needs to rise over time. Interestingly it was also mentioned that nature has a large role to play in meeting net-zero targets. In the short term, nature-based solutions should be leaned on for 2030 goals in conjunction with longer-term systems transitions. Also, that deforestation needs to stop across all value chains by 2030 if anyone is to reach net-zero.
There are three messages these two events had in common. (1) The necessity for some level of consistency in carbon pricing and carbon credit valuation across geographies and sectors. (2) The need for the private sector to take action now around carbon reduction regardless of the outcome of the Paris Agreement’s next iteration. (3) Ambitious climate targets such as net-zero can only be met if public and private sector work within themselves and with each other to create actionable plans that exceed the current Paris targets.
