Carbon trading markets set for boost at COP28

investmentnews.com:

Climate negotiators at COP28 may bolster carbon trading when they decide on rules for a new United Nations-overseen emissions market that can lower the cost of fighting global warming.

In Dubai, envoys representing more than 190 nations are set to discuss standards for credits that allow their holders to compensate for pollution at home by investing in projects elsewhere to cut emissions or remove carbon dioxide from the atmosphere. The UN-sponsored program aims to ensure high quality credits within an internationally agreed framework, offering investors greater certainty amid concerns that some existing voluntary projects do little or nothing to curb climate change.

“At COP28, regulators can help create demand by embracing acceptable quality standards that give voluntary buyers confidence,” said Benedikt von Butler, portfolio manager at Evolution Environmental Asset Management LP.

The idea of using cross-border carbon markets to accelerate the green transition is nothing new. The Kyoto Protocol in 1997 paved the way for the Clean Development Mechanism: a program once worth $8.2 billion per year that boosted aid flows to emerging countries needing help in curtailing emissions. 

It allowed developed countries to use credits generated by cheaper greenhouse gas-cutting projects in developing nations to meet part of their pollution-reduction targets under the Kyoto treaty. After about six years of operation, prices collapsed close to zero in 2012 on concerns about the integrity of the projects and the European Union’s decision to limit the use of CDM credits for compliance in its domestic market.

The concept got a fresh boost from the 2015 Paris Climate Agreement: under Article 6, nations agreed to work toward a new global