The future of global carbon markets

Key findings

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Key findings of our report include the following:

The private sector will need to account for obligations in new carbon market systems and prepare for it in their bottom lines, regardless of developments at the international level.
Companies will have to keep track of, and anticipate, international, regional and local climate policies.

Developing countries, including China, are now introducing mandatory carbon markets for businesses.
Stimulated by the potentially harmful effects of climate change, developing countries are very actively implementing national climate strategies. Some countries are assessing such schemes under the World Bank’s Partnership for Market Readiness fund.

Opportunities already exist for businesses to get involved in the design and trials of the scaled-up market mechanisms, with the aim to capitalize later.
The private sector can play an important role in the development and execution of Nationally Appropriate Mitigation Actions (NAMAs) which can drive emissions-reduction in developing countries. Businesses should establish direct partnerships with developing countries within the scope of NAMAs.

After 2020, companies are likely to be carbon constrained in all the major emitting and emerging countries, and a global carbon market could appear.
After this date, all major emitters and industrialized countries could be carbon-constrained domestically, and developing countries could provide offsets on a large scale through efficient market mechanisms. The linking up of these unilateral schemes combined with scaled-up market mechanisms would lead to a global carbon market.

Sectoral mechanisms may be a catalyst for a global carbon market in the longer term and some sectors may be more affected than others.
Global sectoral approaches will create a level playing field for the private sector. Sectoral crediting mechanisms will become important after 2020, and are potentially pilot schemes for sectoral trading mechanisms or domestic emissions trading systems.

The public and private sectors will need to cooperate and show leadership.

The private sector must come to terms with the growing levels of carbon regulation around the world. Besides challenges, plenty of opportunities exist for the private sector within this framework.