To transition to a low-carbon economy, the London Stock Exchange (LSE) is developing a new Voluntary Carbon Market (VCM).
The market will:
- Create capital for new climate projects worldwide; and
- Provide access to high-quality carbon credits for companies and investors.
According to LSE’s CEO Julia Hoggett, by “raising the profile of the public listed fund market, we can enhance the disclosures and the visibility of that market and also direct capital into it.”
Once launched, how will this new Voluntary Carbon Market work?
First, the project developer identifies project(s) that will generate voluntary carbon credits.
If approved, the fund will list on the LSE (under the new VCM) for investors to invest.
The fund then issues carbon credits as a dividend to investors. Investors can keep buying or selling shares in the fund and receive returns in carbon credits, cash dividends, and other distributions.
The carbon credits can be used for their own purposes or traded.
What are carbon credits and why are they so popular?
Simply put, one carbon credit equals one metric ton of carbon. So, one metric ton of carbon is offset through an approved environmental project for every carbon credit bought.
The reason why carbon markets are booming is that companies need to find ways to lessen their carbon footprint. Deadlines to meet regulations are approaching, and quite frankly, the public is demanding it (which is a good thing).
Many believe that the increased financing that will be available through this new VCM will improve the supply of credits.
Since these credits are in high demand, supply right now is low.
Why are Voluntary Carbon Markets so important?
Not every industry has the ability to be at net-zero emissions yet. Much of the technology needed to get there is not developed or accessible. Or, the cost (currently) is exorbitant.
This doesn’t mean that companies don’t want to reach net-zero – they do. But they need to take action interim.
Carbon offsets prove to be a valuable solution.
Though LSE’s Voluntary Carbon Market solution is still being fine-tuned, it has attracted interest from a range of partners.