The London Stock Exchange has a new market to scale funding for projects that reduce carbon emissions. The goal is to make funding more transparent, which should help bring the industry to scale – a significant step forward for the carbon credit industry.
The voluntary carbon market is an exchange that companies use to offset their carbon emissions. One metric ton of carbon is “offset” from the atmosphere through an environmental project for every carbon credit purchased.
Companies use this method to offset their carbon emissions (especially when the technology isn’t available yet to remove emissions altogether). The industry has boomed this past year as governments and companies alike look to meet Paris Agreement standards.
According to LSE, though the voluntary carbon market has great promise, it “remains small and fragmented and as such it lacks the market infrastructure and access to institutional investors that will truly enable it to scale.”
In an interview with CNBC’s “Squawk Box Europe,” LSE CEO Julia Hoggett said, “One of the challenges we’ve had in this market is that it has been … less transparent and less visible to everybody in terms of participants and how the [climate change mitigation] projects are managed.”
By raising the profile of the public listed fud market, the LSA can enhance the disclosures and visibility and increase the capital. This will make the voluntary carbon market more visible and accessible.
At COP26, British Finance Minister Sunak said that the UK will expect financial firms to publish their climate change mitigation plans by 2023.
LSE’s statement went on to say, “We anticipate that corporates and other organizations with long-term needs for carbon credits will become investors, using the carbon credits delivered by these vehicles – which may be issued as an alternative or additional dividend – to meet a portion of their offset need.”
The global carbon market is expected to reach $100 billion by 2030. Some experts believe it is on track to reach $22 trillion by 2050.
