Countries are trading carbon through domestic means rather than going through a global market, as most goods do.

This provides each country with unique strategies when dealing with emissions. However, there isn’t a global unified solution on how to achieve carbon neutrality with domestic markets.

China recently launched its own carbon market. China’s plan covers 10,000 companies in most industrial sectors. The EU has also recently launched carbon pricing methods as well earlier this year.

This is fantastic news as tackling the Paris agreement’s goal of 1.5 degrees Celsius above normal temperatures by 2050 will take a global effort. China previous carbon plans increased the number of emissions covered by carbon pricing by 6%.

Both carbon unions have tremendous potential as the carbon ramp up continues. Currently, the EU aims to be carbon neutral by 2050. China wishes to do the same by 2060.

Unfortunately, many carbon markets remained unpriced and unregulated. The US has yet to release their plans regarding carbon pricing.

According to the World Bank, only 45 countries in the world have carbon pricing initiatives. To make a dent in climate change, that number will need to increase heavily.

After holes in the ozone layer appeared in the 1970s and 1980s, countries acted and banned Hydrofluorocarbons (HFCs), which depleted ozone. Now, the ozone layer is replenished and the ozone crisis is solved. If the world takes similar action regarding greenhouse gases and price carbon emissions through a global carbon market, we may see climate change being stopped in its tracks.

Carbon Emissions are continuing to rise globally and the largest emitters are slowly committing to plans to cut carbon emissions. The President of COP26, Alok Sharma, said these large emitters must drastically reduce their emissions. According to Sharma, these countries should release carbon plans sooner rather than later to avoid the damage accrued from climate change.

Extreme weather resulting from climate change is already becoming increasing frequent. Wildfires are ravaging across the world while sea levels are rising among increasing temperatures.

Sharma’s concerns come as the ICPP has released a report revealing significant action is required to combat climate change. In a statement, Sharma said “If ever there was going to be a wake-up call to the world when it comes to climate change, this report is it.”. The Paris agreement’s goal of 1.5 degrees Celsius above pre-industrial temperatures is in danger of not being obtained. Sharma mentioned there is still hope to stop the damage being done, but there is still a long way to go.

Sharma is targeting G20 countries because 80% of global carbon emissions are emitted from G20 countries. G20 countries must drastically reduce their carbon emissions. As a result of drastic plans, we could see a major shift in the fight against climate change.

The carbon market is growing at exponential rates. New legislation has passed all around the world and countries are shifting to stricter carbon laws. As a result, carbon funds have been having a fantastic year.

Who is at the forefront of this boom?

One such fund is the KraneShares Global Carbon ETF. Trading under the ticker KRBN, the ETF is up over 74% in the last year as well as having $540 million dollars in assets. The majority of KRBN’s portfolio consist of EU carbon futures, which have boomed over 60% over the past year.

Another growing fund is the iShares MSCI ACWI Low Carbon Target ETF which has increased over 32% in price over the last year.

Why is the carbon market soaring?

The interest in carbon credits is soaring as the market booms. Climate change is becoming increasingly alarming as countries fight to keep global temperatures under 1.5 degrees Celsius above levels today. Carbon taxes and tariffs are being introduced in the EU and China. Carbon credits have never been in such demand as restrictions become increasingly strict.

Another factor behind carbon’s big boom is the long-term outlook of reducing carbon emissions. The job against climate change is not done and will not be finished until countries become carbon neutral in 30-40 years. Investors are seeing a long-term investment. One in which governments are making it their priority to invest into.

Around 3 Americans create enough carbon emissions annually to kill a person. In addition, the emissions from industrial sources such as a coal power plant would result in around 900 deaths.

The numbers above come from a report released by Columbia University. A number was calculated to determine how much monetary damage each ton of carbon emissions does. As well, deaths per each ton of CO2 released into the atmosphere was calculated.

The backbone of the report states that for every 4,434 metric tons of carbon emissions released, one premature fatality will occur. Increased global temperatures results in increased fatalities. The report also mentions 4,434 metric tons of carbon is “equivalent to the lifetime emissions of 3.5 average Americans”.

Retaining current global temperatures would save an estimated 74 million people. The report also only factors in heat-related mortalities rather than deaths from natural disasters such flooding or storms. Various studies have linked increased global temperature with an increase in natural disasters. Therefore, the estimate of 74 million lives is an understatement.

The study not only outlines the problems with global temperature increase, but also highlights the impact of American citizens. 12.8 average world people produce 4,434 metric tons of carbon while 146.2 Nigerians produce the same figure.

Carbon neutrality by 2050 requires significant steps. Now, human lives are presently at risk, rather than the previous thinking that humans would deal with the consequences later.

Low-carbon hydrogen production has been labelled as a poor method to alternative fuels.

The World Energy Council has released a report which doubted the ability for low-carbon hydrogen to be “cost competitive with other energy supplies”. The report also mentioned that without major financial support, it would be difficult to make low-carbon hydrogen cost competitive.

The report however did mention that low-carbon hydrogen is a growing sector and has yet to fulfill its potential. Projects all over the world are in construction at release time of the report.

Hydrogen cars are less of an idea now and are becoming a reality. As such, creating hydrogen while producing low fuel emissions could thrust hydrogen into being the fuel source of the future.

Currently, the price of renewable hydrogen is too expensive to be prominent. The U.S. did begin an initiative to reduce prices of renewable hydrogen around 80%, from about $5 to 1$ per kilogram. But this initiative aims to complete this objective within a decade. This means low-carbon hydrogen will not be a proper solution to climate change until at least 2030, by which time the global temperature increase may have already passed the Paris Agreement’s goal of 1.5 degrees Celsius.

It remains to be seen whether hydrogen or electricity is chosen as the fuel method of the future. Low -carbon hydrogen would require significant contributions but stopping climate change will require every solution possible.

China has created a national carbon emissions market to limit emissions throughout the country. The announcement comes after the EU has announced their own carbon pricing plans.

China’s plan is very similar to the concept of carbon credits. First, emission limits are given to companies based on data from the previous year. Buying or selling allowed emission amounts from other companies increases or decreases the max pollution limit.

As well, Companies involved in the plan are to submit emissions data annually. Then, the Ministry of Ecology and Environment checks the results. Exceeding the emission limits will result in fines or decreasing the allowable emission limit.

Initially, the program will include companies in the coal and gas sectors. The end goal is to cover 10,000 companies from all high-emission industries such as aviation, iron and steel, chemicals, and building materials.

China aims to be a net-zero emitter by 2060. Currently, China is responsible for 27% of the global carbon emissions. This could mark a huge shift in global carbon markets. As emissions decrease, the amount of credits available will also decrease.

President of China Xi Jinping said in a speech to the UN last September that China is on track to produce peak emissions before 2030. The new carbon plan is a step in the right direction that shows China’s willingness to fight in the battle against climate change.