The future of global carbon markets

Prospect of an international agreement: business impact

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Carbon markets are fast becoming a key policy instrument to combat climate change around the world.

Companies that are not already carbon constrained will need to prepare themselves for carbon legislation in the short to medium term, and a low-carbon economy in the long run. This will be challenging, but it will also bring a wealth of opportunities where proactive firms will be able to benefit.

There has been a lack of clarity in recent years about a follow up to the Kyoto Protocol, the legally binding international treaty, of which the first commitment period expires at the end of this year. In the absence of strong international policy drivers, individual nations and local authorities started a bottom-up process to develop low-carbon strategies of their own.

For the first time since the signing of the United Nations Framework Convention on Climate Change in 1992, all countries, developed and developing alike, reached an international climate agreement when the Durban Platform was signed at the end of 2011. However, the scope and targets of the Platform are not yet defined.

The objective of ongoing negotiations is agreement on the new future climate regime by 2015, which will apply to all parties from 2020.

Business needs to be aware and understand carbon markets as constant developments will increasingly impact the private sector.

Here we discuss the current state of carbon markets, how they will evolve until 2020 without a global climate agreement, how the Durban Platform could affect the markets after 2020, and how and where businesses will be affected.