Carbon markets are a critical tool for achieving global climate goals, especially in the short and medium term. They mobilize resources and reduce costs to give countries and businesses the space they need to smooth the low-carbon transition and achieve net zero emissions in the most efficient way possible. Carbon markets encourage climate action by allowing parties to trade carbon credits generated by reducing or removing GHGs from the atmosphere, such as switching from fossil fuels to renewable energy or improving or conserving carbon stocks in ecosystems such as a forest.
Trading in carbon credits is expected to cut the cost of implementing countries’ Nationally Determined Contributions (NDCs) by more than half – up to $250 billion by 2030. In other words, carbon trading could enable the removal of 50% more emissions (approximately 5 gigatonnes of CO2 per year by 2030) at no additional cost. Markets are expected to become obsolete over time as every country achieves net zero emissions and the need to trade emissions diminishes.
