Carbon market convergence does not mean a single global carbon price

Photo by Arnaud Mesureur on Unsplash

Almost one-quarter of global emissions are covered by some form of direct carbon pricing, up by around 10 percentage points over the past decade. By 2030 almost two-thirds of global emissions could be covered by carbon pricing.

As the share of emissions covered by regulated compliance carbon pricing expands, many governments are reserving a role for the carbon credit market, allowing at least some of the obligation to be met through emissions avoidance or carbon removal credits.

This blurring of the lines between regulated compliance carbon markets and the verified carbon market is likely to intensify as countries start to focus on how they can realistically meet their Paris Agreement commitments. In particular, international trading of carbon credits will start to play a much bigger role in carbon markets.

This convergence of global carbon markets will reignite the vision of a global price on carbon, or at least that all carbon markets will converge on the highest price in the marketplace. But as this article serves to highlight, that is not necessarily how things will, or indeed should, turn out. Rather than pushing for uniformity, the carbon market is better served by embracing its differences.

Lets dive in.