SPEAKER: Whether you're an organization, investor, or individual, carbon markets will help you transition to a low-carbon economy. How? By converting CO2 emissions into commodities that can be traded within carbon markets. Trading these commodities can happen in one of two carbon markets, voluntary or compliance.
The compliance market is regulated by the government, whereby you must comply with set emission limits and reduction targets. Anyone participating in this market must legally purchase carbon credits equal to their annual emissions. When the number of credits in an initiative is limited, participants must trade with each other, and thus it works in their best interest to reduce their carbon emissions to save them from buying more carbon credits. According to Refinitiv, as of 2021, the global carbon market reached $760 billion.
Compared to the compliance market, the voluntary market is smaller because it's self-regulated. Participants driving this market are companies and individuals taking the voluntary responsibility to mitigate their own carbon emissions. Despite being small, the voluntary market is steadily gaining momentum, and what it lacks in size, it makes up for in flexibility and innovation. For one, it supports new innovations by providing direct private funding to climate action projects that may have never seen the light. It also benefits biodiversity protection, pollution prevention, public health improvements, and job creation.
Though they operate separately from one another, voluntary and compliance markets can still cross paths with one influencing the other. One example comes from the Climate Action Reserve in California, where the reserve developed a series of voluntary offset project protocols that were subsequently adopted in the California Compliance Carbon Offset Program.
Whether you participate in a voluntary or compliance market, they're both an important instrument and complement one another with the overall goal of mitigating emissions. Stay tuned for our next video, where we will continue exploring the world of carbon markets. Until then, learn more about our work and get in touch at publicisapien.com.