How to Invest in Carbon Credits, Carbon ETFs, and Carbon Stocks

Carbon Credits
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How to Invest in Carbon Credits, Carbon ETFs, and Carbon Stocks

Right now, the voluntary carbon markets are still in their early stages.

Having surpassed $10.8 billion USD in transaction value in 2023, there’s tremendous amounts of room for growth – as well as plenty of catalysts.

The Taskforce on Scaling Voluntary Carbon Markets forecasts that in order to meet the climate change targets set forth in the Paris Agreement, the voluntary carbon markets will need to grow 15-fold by 2030 and 100-fold by 2050, from 2020 levels.

Those are the kind of returns that make any investor sit up and take notice.

But the question then becomes: what’s the best way for retail investors to capitalize on this expected growth in the global carbon markets?

As of the time of writing, there still isn’t a very well-developed retail market for the voluntary carbon markets. Corporations and institutional investors have a better selection, as they can negotiate directly with carbon offset projects and the like.

Still, there are a couple ways to get your feet wet in the carbon markets if you’re an individual investor. We’ll go through some examples.

1. Carbon Mutual Funds and ETFs

One of the simplest and lowest-risk ways to invest in the carbon markets is through a fund. As many such funds have diversified holdings, this helps to reduce the risk of investing in one, although in exchange, your potential return will also be lower.

carbon etf

There is a wide range of levels of exposure to consider here. The lowest possible level of exposure to the carbon markets would be to invest in funds that are considered “low-carbon”.

These are funds whose mandates are not restricted purely to carbon-credit-related companies, but include any business whose operations are considered to have a low impact on the environment, or companies who have made voluntary emissions reductions or even net zero pledges.

In funds like these, you won’t find any holdings from oil & gas, coal, steel, or any other such “dirty” industries unless they’ve already made net-zero commitments. Examples of such funds include the iShares MSCI ACWI Low Carbon Target ETF (CRBN), or BlackRock’s U.S. Carbon Transition Readiness ETF (LCTU).

Still, that leaves plenty of options on the table – for instance, many such funds often include the FAANGM companies in their holdings, as they are investment industry darlings with relatively clean operations thanks to their business as tech companies. And even some companies with dirty operations, like Exxon Mobil or ConocoPhillips, can make the cut due to their net-zero commitments.

Some other low-carbon ETFs focus on so-called “green bonds” instead, which are fixed-income debt instruments specifically issued by companies and governments looking to finance sustainable, environmentally friendly projects. A municipal government, for instance, might issue a green bond to help fund the development of a public transit system. An example of a fund focusing on green bonds would be the iShares Global Green Bond ETF (BGRN).

While such low-carbon funds may not seem like a very direct way of investing in the carbon markets, removing any exposure to dirty companies from your portfolio is a great way to start making green investments. After all, it is very likely that as the global push for net-zero goes more and more mainstream, dirty companies will be first on the chopping block for investors and institutions alike.

  • Think of it like paying off your debts before investing your money. By first eliminating the dirty companies and funds that will drag your portfolio down in the future, you will be able to put your money to better use elsewhere.
fossil free funds
Fossil Free Funds tool.

There already exist tools such as Fossil Free Fund to help you identify mutual funds and ETFs that have minimized their exposure to dirty investments. Choosing these low-carbon funds over competing products that lack such restrictions would be an easy change to make as a start to your carbon portfolio.

Moving up from funds that simply do not invest in dirty companies, the next level of exposure would be funds that only invest in green, carbon-market-related companies. We’ll call these “green funds.”

Green funds invest in industries like electric vehicle manufacturers, renewable energy suppliers, green tech companies, and so on. Examples of such funds include the iShares Global Clean Energy ETF (ICLN), or the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN).

In such funds, you’d be able to find companies like Tesla (TSLA) or Brookfield Renewable Partners (BEP).

Since the carbon and clean energy markets still aren’t fully developed yet, there aren’t all that many companies in the space. As a result, there are fewer green funds than there are low-carbon funds.

However, these green funds have significantly more exposure to the carbon markets than the low-carbon funds that simply do not have any dirty companies in their holdings.

That’s because most, if not all, of the companies that green funds invest in are already net zero, or even net negative. TSLA, for example, earned around $1.79 billion in revenue from carbon credit sales in California’s compliance market in 2023.

In other word, these companies can already generate carbon credits, and would most strongly benefit from the explosive growth that needs to happen in the voluntary carbon markets to stay on track with the Paris Agreement’s targets.

The final category of funds would be those whose primary holdings consist of carbon credit futures. These funds are the riskiest, as they aren’t diversified at all, but they also directly track the performance of their underlying carbon credits nearly one-to-one.

Investing in such funds would be analogous to investing in a fund that only holds physical gold, rather than a fund that invests in gold producers and explorers. Though the performance of such a fund would most closely match the performance of carbon credits themselves, that doesn’t necessarily mean they would provide the best return, either, despite their riskiness.

This type of fund is best left to veteran investors who have a specific goal in mind when adding such a fund product to their investment portfolio.

You can find all listed funds of each type described above on our Stocks Watchlist.

2. Green Companies

tesla green company
Telsa is one of the most well-known green company out there.

For sophisticated investors with a narrower scope in mind, green companies are another great way to invest in the carbon credit market.

Many green companies, such as TSLA, are net negative carbon emitters. As a result, they’re already creating carbon credits that can be sold in their respective compliance markets, if applicable.

However, since there are far more jurisdictions without compliance markets than those with, there are lots of green companies who haven’t been able to fully tap into the carbon credit market yet. A unified global carbon credit marketplace, such as one put in place through the ratification of Article 6 of the Paris Agreement, would go a long way towards solving that.

Electric vehicle manufacturers, renewable energy companies, biofuel companies, battery tech companies, and waste recovery companies are just some of the examples of the many different types of green companies that could potentially leverage the sale of carbon credits as part of their revenue streams down the road, on top of their regular business operations.

There are already many publicly listed green companies that could make for potential investment opportunities, such as Tesla competitor NIO Inc. (NIO), or solar energy equipment and services provider First Solar (FSLR). However, since the green tech craze is starting to take off, there are also many private companies looking to raise capital right now.

While investing in private companies can be much riskier than investing in publicly traded companies since there’s no guarantee you’ll be able to exit your position easily, they tend to offer much more attractive pricing and terms for that exact same reason. If you can get access to private deals through your broker or other means, they can be worth considering if they fit your risk profile.

3. Carbon Credits Futures

EU carbon neutral 2050
European Union aims to be climate neutral by 2050. Carbon Credits are a key part of their strategy.

For the most direct exposure to the voluntary carbon markets, purchasing carbon credit futures, such as European Union Allowance futures on the ICE, is a viable option as a retail investor.

However, this method can be quite complicated and risky compared to other forms of green investing and is beyond the scope of this article.

Carbon offset projects would theoretically offer the next best exposure to carbon credits. Unfortunately, at the moment it’s quite difficult for retail investors to directly invest in carbon offset projects, as they tend to raise capital privately.

That said, there are companies that focus on investing in carbon offset projects, making the generation and sale of carbon credits the primary component of their business model. These companies have excellent exposure to the growth of carbon credits and the voluntary carbon markets. Carbon Streaming Corporation (NETZ.NEO) is one such example.

4. Company Watchlist

The full list with ticker and prices can be found here. A summary of the companies are shown below.

CRBN

The iShares MSCI ACWI Low Carbon Target ETF tracks the index of the same name, and contains holdings comprised of over 1,000 low-carbon companies around the world. Top holdings are heavily weighted towards U.S. stocks and include Apple, Microsoft, and Amazon. While it’s low risk thanks to its broad diversification, it provides less exposure to the growth of the carbon markets in return. Similar to, but much larger than, LOWC which is managed by a different firm.

GRN

The iPath Series B Carbon ETN tracks the Barclays Global Carbon II TR USD Index, which is almost entirely comprised of EU ETS carbon credit futures. As a result, this ETN will closely follow the price performance of EU ETS carbon credits, providing good exposure to the growth of the carbon markets, though with greater risk and volatility.

KCCA

The KraneShares California Carbon Allowance ETF provides direct exposure to the California Carbon Allowances that trade under California’s cap-and-trade program. As a result, this ETF will closely follow the price performance of California’s CCA carbon credits, providing good exposure to the growth of the carbon markets, though with greater risk and volatility.

KEUA

The KraneShares European Carbon Allowance ETF provides direct exposure to the European Union Allowances that trade under the EU’s Emissions Trading Scheme. As a result, this ETF will closely follow the price performance of EU ETS carbon credits, providing good exposure to the growth of the carbon markets, though with greater risk and volatility.

KRBN

The KraneShares Global Carbon ETF provides exposure to the EU ETS carbon credits, California’s CCA carbon credits, and the RGGI carbon credits of the northeastern United States. Though current portfolio weighting heavily favours European Union Allowances, this ETF does cover all three major compliance markets, providing good exposure to the growth of the carbon markets with less risk and volatility than the other carbon credit futures ETFs.

LCTU

The BlackRock U.S. Carbon Transition Readiness ETF is comprised of mid-to-large-cap U.S. companies that are considered to be better positioned to benefit from the transition to a low-carbon economy. With over 300 holdings in its portfolio, this ETF won’t provide as much direct exposure to the growth of the carbon markets but will provide more long-term stability thanks to its diversified holdings.

LCTD

The BlackRock World ex U.S. Carbon Transition Readiness ETF is comprised of mid-to-large-cap global companies that are considered to be better positioned to benefit from the transition to a low-carbon economy. With over 300 holdings in its portfolio, this ETF won’t provide as much direct exposure to the growth of the carbon markets but will provide more long-term stability thanks to its diversified holdings.

LOWC

The SPDR MSCI ACWI Low Carbon Target ETF tracks the index of the same name, and contains holdings comprised of over 1,000 low-carbon companies around the world. Top holdings are heavily weighted towards U.S. stocks and include Apple, Microsoft, and Amazon. While it’s low risk thanks to its broad diversification, it provides less exposure to the growth of the carbon markets in return. Similar to, but much smaller than, CRBN which is managed by a different firm.

NETZ.NEO

Carbon Streaming Corporation is a royalty-type company focused on growing a portfolio of high-quality carbon credit streams. By providing capital to fund carbon credit projects, NETZ earns the right to receive all or a fixed portion of all future carbon credits generated by said projects. Revenue can then be derived from the sale of these carbon credits. Though a higher risk investment, NETZ provides excellent exposure to the growth of the carbon markets.

SMOG

The VanEck Low Carbon Energy ETF is a green fund that tracks the MVIS Global Low Carbon Energy Index, and its holdings are comprised of clean energy companies. These components include renewable energy companies, electric vehicle companies, battery tech companies, and so on. With just over 70 holdings, this ETF is less diversified than most low-carbon funds but provides more targeted exposure to the growth of the carbon markets in return.

SPYX

The SPDR S&P 500 Fossil Fuel Reserves Free ETF tracks the S&P 500 Index but doesn’t hold any of the companies in the S&P 500 that own fossil fuel reserves. That’s just 11 companies out of 500, so this ETF will still closely mimic the performance of the S&P 500 Index, but with a lower carbon footprint. This ETF would serve as an excellent replacement in any portfolio that already holds a fund or other product linked to the S&P 500.

BGRN

The iShares Global Green Bond ETF follows an index comprised of investment-grade green bonds issued to fund environmental projects around the world. With over 600 holdings primarily comprised of sovereign and other government-related debt, BGRN can add green exposure to fixed income portfolios.

GRNB

The VanEck Green Bond ETF tracks the S&P Green Bond U.S. Dollar Select Index, which is comprised of U.S. dollar-denominated bonds issued to fund environmental projects around the world. With nearly 300 holdings largely comprised of sovereign and other government-related debt, GRNB can add green exposure to fixed income portfolios.

Nine Major Companies Pledge Zero-Carbon Shipping by 2040

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Nine Major Companies Pledge Zero-Carbon Shipping by 2040

The maritime industry accounts for 90% of global trade and 3% of global emissions. Now, through a pledge by The Aspen Institute, nine major companies have pledged to reach zero-carbon shipping by 2040.

The Aspen Institute expects other retailers and manufacturers that use maritime shipping to sign up. If not, maritime emissions could reach 10% of global emissions by 2050.

Dan Porterfield, President of The Aspen Institute – the non-governmental organization that has coordinated these zero-carbon pledges — would like to see all those involved in the supply chain, as well as the government, join in.

“Maritime shipping, like all sectors of the global economy, needs to decarbonize rapidly if we are to solve the climate crisis, and multinational companies will be key actors in catalyzing a clean energy transition.”

Current companies include Amazon, Brooks Running, Frog Bikes, Ikea, Inditex, Michelin, Patagonia, Tchibo, and Unilever.

The push for zero-carbon shipping.

The Paris Agreement and upcoming COP26 summit have certainly lit a fire under companies, as consumers, investors, and governments alike, recognize the need to go green.

In fact, many feel the Paris Agreement and COP26 are the reason behind the carbon credit boom taking place.

Companies that signed the pledge are thrilled to do so, even though some, such as Amazon, have been criticized for not doing more.

Michelle Grose, Head of Logistics at Unilever, said, “By signaling our combined commitment to zero-emission shipping, we are confident that we will accelerate the transition at the pace and the scale that is needed.”

The cost of zero-carbon shipping.

It is estimated that the cost for the shipping industry to be net-zero is $2 trillion. This is mainly because of how much it costs to make cleaner fuels (and newer ships).

There are shipping companies that are making the transition. Still, at almost $175 million per ship, change can’t happen overnight.

However, as companies move forward with cleaner shipping solutions, develop new technologies, and utilize carbon credits to offset emissions, net-zero goals are attainable. This is especially true when companies – such as these nine — join to meet them.

Billionaire Backed Carbon Company Closes Seed Round Financing

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Billionaire Backed Carbon Company Closes Seed Round Financing

Boreal Carbon Corp., a Canadian private company raises $4 million seed round from strategic investors.

Key backers are Canadian billionaire David Thomson’s private company (Osmington), Senvest Capital Inc (owner of the Toronto Star), and NordStar Capital.

The chairman of the company is Paul Rivett, former President of $14 Billion market cap Fairfax Financial. Mr. Rivett is also a co-founder and Chairman of NordStar Capital, one of their seed investors.

The $4 million investment will allow Boreal to fill important company positions such as chief forester, carbon-credit experts, and investment analysts, as well as source possible acquisition prospects.

Boreal envisions becoming a leading carbon credit developer through the acquisition and management of forestry projects in North America. There are positioning themselves as a pure-play forest carbon credit developer.

Brendon Abrams, Boreal CEO, said “As the world moves towards a net-zero GHG economy, carbon credits will play an integral role to facilitate governments and corporations in meeting their GHG emissions targets”.

“Combined with the growing influence of ESG investing, an increase in the cost to pollute, and the prospect for significant regulatory changes in Canada and the United States, we believe the value of high-quality verifiable carbon credits will increase over the coming years.”

“These projects are quite capital intensive because we’re essentially buying land where forestry projects operate,” Abrams went on to say. “Each project will be in the multiple of millions of dollars.”

This will likely lead to a second round of financing early next year, depending on their acquisition prospects.

The global market for carbon credits is expected to grow exponentially with some estimates reaching $50 billion by the end of the decade.

Carbon Emissions Increase for World’s Wealthiest Nations

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Carbon Emissions Increase for World’s Wealthiest Nations

During the pandemic, carbon emissions dropped nearly 6%. However, according to the latest Climate Transparency Report, carbon levels are on the rise again.

The biggest offenders? The G20 – who are responsible for 75% of emissions worldwide.

The report found that carbon emissions are on track to rise 4% across the world’s wealthiest nations by the end of this year.

The report’s authors blame the increase in emission levels due to fossil fuels. Gas usage has been up by 12% since 2015, and coal use is projected to rise by 5% this year too.

Emissions levels have increased to the point that China, India, and Argentina are on track to top their 2019 emissions levels. It is important to note that China is responsible for 60% of the increase. However, coal increases are taking place across the US and India as well.

Most G20 members didn’t use pandemic recovery packages to promote climate initiatives. For example, out of the US $1.8 trillion package, only $300 billion went into “green” programs.

What is being done to combat carbon emissions?

Though carbon emissions are increasing, the report did have some positive news.

Renewables are now 12% of power, compared to 10% in 2020. Plus, all G20 members have new 2030 carbon plans to present during the COP26 summit at the end of the month. Most G20 countries now acknowledge the need to reach net-zero targets by 2050.

Though these moves are a step in the right direction, leaders must put stringent policies into place. Investing in technology and carbon markets, which have grown exponentially, are both ways to fight climate change. Experts expect the global carbon market to be valued at $22T by 2050.

If this report highlights anything, it is that more needs to be done – especially from the G20. As US President John F. Kennedy once said, “For those to whom much is given, much is required.”

The Green(peace) Revolt?

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The Green(peace) Revolt?

Search “Greenpeace” and “carbon offsets” and you’ll get some surprising results.

At least, they’ll be surprising – if you still think that Greenpeace is anything less than beyond radical.

At a time when companies all around the world are gathering behind carbon credits & offsets.

Greenpeace is publishing articles like:

The latest and greatest in Greenpeace’s single-handed war on carbon offsets landed a couple of week ago.

Jennifer Morgan, Executive Director for Greenpeace, called for a complete end to carbon offsets in a Reuters interview.

“There’s no time for offsets. We are in a climate emergency and we need phasing out of fossil fuels.”

Surprised? Greenpeace makes a three-part case against the voluntary carbon market:

  • Offsets take too long/are unreliable
  • Only radical decarbonization will reduce CO2 levels
  • Offsets are mere greenwash

This “greenwashing” accusation is the heart of the matter. So, is Greenpeace onto something? Or are they once again ignoring the real benefits of carbon offsets in a push to achieve their own version of a perfect solution – one that doesn’t work in real life?

The Greenwash Accusation

More and more businesses are jumping into the Voluntary Carbon Market (VCM), expanding their own portfolio of offsets and using terms like “NetZero” and “carbon neutral” in their advertising.

The energy sector alone witnessed a 5x increase in offsets between 2020 and the first half of 2021!

In response, radical environmentalists like Greenpeace are increasingly deploying the greenwashing accusation as a means of discrediting any big-business solutions to the climate crisis.

Vast growth in the size of the VCM? Greenwashing!

Ever-increasing efforts to achieve carbon-neutral practices? Greenwashing!

Greenpeace raises some legitimate concerns with the current state of the young VCM. Most nature-based offsets do have a long lifespan – 20 years or more – but they get applied instantly. Forests can burn or become diseased, and the overall impact of a given offset may not always be what was predicted.

At the same time, calling the entire VCM greenwashing hints at a darker motivation:

Greenpeace doesn’t think businesses can or should solve their own problems. 

No one denies that the same business sectors that drive our modern world are also responsible for the vast majority of GHG emissions.

But Greenpeace, and their allies, don’t think that businesses should have a voluntary role in addressing those issues. The key word there is voluntary – governments should, in Greenpeace’s solution, play a far more active role in forcing big business to decarbonize.

What Greenpeace suggests is simple, but not reasonable: massive reduction in GHG emissions as fast as possible, even when that reduction would cripple or transform entire sectors of the economy.

The only way to decarbonize that quickly is to reduce production and consumption in those sectors. That means dramatically reducing the amount of meat and dairy products people consume.

What would the impact be on rural communities? How would that transformation affect the agricultural and meat-producing sectors more broadly?

These are questions Greenpeace doesn’t answer, instead they falling back on their claims about how dire the need is.

Offsets: part of a real-world solution to the climate crisis

Lost in Greenpeace’s protests is the fact that carbon offsets and the VCM are real-world solutions to real-world problems. The VCM allows farmers to shift production, turning farmland into grassland or forests for offsets.

Those offsets provide a much-needed revenue stream for those farmers, easing the transition. In fact, some offsets, like no-till farming, provide environmentally-friendly ways to continue production and still achieve GHG reductions.

Is the VCM perfect? No. But it’s worth remembering three things:

  • The VCM is in the early stages
  • Standards are improving
  • VCM growth recognizes the problem

Offsets have only taken off in the past decade. Growth has been meteoric in the past few years, but the market is still young. Like all emerging markets, standards will improve and companies can adjust to increasing regulation and best practices.

Finally, what Greenpeace fails to see is that the VCM is a genuine recognition of the problem. It may not be a perfect solution, but the rapid growth of the VCM speaks to a growing recognition of the climate change problem.

For that, Greenpeace should be praising the VCM – Not revolting against it.

The Royal ESG Investing Firm

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The Royal ESG Investing Firm

Prince Harry and Meghan, the Duchess of Sussex, have joined Ethic – a fintech asset manager focusing on ESG investing.

Their goal is to promote investments that are aligned with the Environmental, Social, and Governance movement, to make sustainable investing mainstream.

In a joint Dealbook interview, Meghan said, “From the world I come from, you don’t talk about investing… You don’t have the luxury to… That sounds so fancy. My husband has been saying for years, ‘Gosh, don’t you wish there was a place where if your values were aligned like this, you could put your money to that same sort of thing?’

Ethic’s dedication to sustainable investing.

According to Doug Scott, an Ethic founder, Ethic screens companies and sectors based on social responsibility criteria. This includes racial justice, climate change, and labor issues.

Ethic currently has $1.3 billion under management. Assets have tripled since they started in 2015.

“You already have the younger generation voting with their dollars and their pounds.” said Harry. He feels this platform is the next step since people can invest in causes dear to them.

Interest in sustainable investing is growing.

As the effects of climate change become more apparent, individuals, companies, and governments want to fight against it. This is being done through technological innovation and carbon offset projects – which are booming.

Right now, the carbon credit and offset industry is expected to reach $22 trillion by 2050. Its growth has been fueled by approaching Paris Agreement deadlines, as well as the upcoming COP26 summit.

With Harry and Meghan serving as “impact partners” and investors, Ethic and other companies that promote sustainable investing can all play a part in combating climate change. It’s encouraging to see those with a voice using it for good.

Harry and Meghan were introduced to Ethic by friends. They hope their involvement will make investing more accessible to younger people.

How Google Cloud is Helping Customers Go Green

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How Google Cloud is Helping Customers Go Green

Did you know that Google is carbon neutral? It’s true. They reached carbon neutrality in 2007 by purchasing carbon offsets. Now, to combat climate change, Google has a new goal in mind: They want to help other companies go green, too. There are two ways Google feels it can do this:

1.) By creating tools that can measure and report carbon emissions related to cloud services.

2.) Through Google Earth Engine satellite imagery and geospatial data platform that businesses can use.

Using the Google Cloud to Go Green.

While these programs have typically been consumer-driven, businesses want in. They feel using Google’s platform can help them find ways to reduce their own emissions.

According to Google’s CEO Sundar Pichai, “Every CEO I talk to is focused on sustainability. And so, using Google Cloud to help them make that transition is a real innovation opportunity.”

Since Google has updated its tools to help customers find data centers that use less carbon, customers opt for the green choice 50% of the time.

Why Companies Want to Go Green.

So what is the driving force behind companies wanting to go green? Renewed commitments to the Paris Agreement and the upcoming COP26 summit. Both have fueled interest in the carbon credit industry as well. Since carbon offsets have played a significant role in helping Google become carbon neutral, companies have noticed.

If you combine carbon offsets with Google’s innovation, net-zero goals for Google (by 2030) and the world (by 2050) seem much more in reach.

London-based entrepreneur David Mytton said that Google isn’t “claiming that everything is great and 100% renewable right now. They’re saying, ‘this is where we’re at, this is where we’re going to get to.”

The more companies that join Google on this green journey, the better.

Blue Carbon from Floating Farms Seaweed

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Blue Carbon from Floating Farms Seaweed

Blue Carbon is sequestered from coastal ecosystems like salt marshes, mangroves, or even seaweed.

Seaweed levels are in decline as they are unable to flourish in warmer water.

Seaweed is an integral part of our ecosystem, so declining levels are a concern. It serves as a habitat for marine creatures — including fish — and a significant food source for us.

The good news is that floating offshore farms can increase seaweed production — an environmental and economic win.

Floating farms work by upwelling cooler waters to stimulate growth on offshore platforms – a method that has proven successful. An experimental floating farm located off the coast of the Philippines is one of the largest in the world and has had exceptional results.

Currently, solar-powered turbines are used to suck water up from a depth of several hundred meters through flexible piping. The plan is to experiment with wind-powered and wave-powered turbines, too.

If this method works (all indications show that it does), it could boost seaweed production and the ecosystems that rely on seaweed. Parts of these ecosystems, which would capture carbon, could then be “sunk” into the ocean as a means of carbon storage.

Cooling the ocean surface by encouraging upwelling may even impact atmospheric temperature. And, while we aren’t quite there yet, if this is, in fact, effective, we very well could be. However, it would have to be conducted significantly (we’re talking across millions of hectares/acres).

Environmental projects that demonstrate such promise may even be considered for high-quality offset projects used in the carbon credit industry.

The global carbon market is expected to reach $22 trillion by 2050. It has expanded exponentially this year as governments and companies alike scramble to meet Paris Agreement goals.

It is important to note that increasing seaweed production doesn’t just positively impact the environment but also the commercial seaweed industry, which brings in between $6 billion and $40 billion per year.

Innovation through floating farms, carbon offsets, and other technological advances are precisely what the world needs to achieve environmental objectives.

What is COP26? The Most Important Conference For Carbon

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What is COP26? The Most Important Conference For Carbon

COP26, short for Conference of the Parties 26, is the 26th annual United Nations Climate Change Conference.

It will take place this year in Glasgow, Scotland, between October 31 – November 12 2021.

The “Parties” involved are all the signatory parties of the United Nations Framework Convention on Climate Change (UNFCCC), an international treaty formed to combat the threat of human-driven climate change.

This framework was first established in 1992 at the United Nations Conference on Environment and Development, and signed by 154 countries. The COP is the supreme decision-making body of the UNFCCC, and annual COP meetings are held to check up on each member’s progress in meeting the targets laid out by the convention.

The first conference, COP1, was held in 1995, and one has been held every year since with the exception of 2020, due to the global pandemic.

Under the UNFCCC, signatory countries are split into different categories: Annex I, Annex II, Least-developed Countries (LDCs), and Non-Annex I.

Annex I countries consist of the most developed countries in the world such as the U.S. and the E.U., as well as a number of Economies in Transition (EITs) like Poland.

Annex II is a subset of Annex I that doesn’t include any of the EITs – in other words, Annex II comprises only countries with the most industrialized and well-established economies. Annex II countries have the additional responsibility of providing financial support as well as technical expertise to other parties of the UNFCCC, on top of their own emissions reduction commitments.

Least-developed countries are among the poorest and least-developed countries of the world, and the size of their economies and extent of their infrastructure is such that their emissions, as well as their ability to effect changes to their emissions, are limited. These countries are given special statuses under the UNFCCC.

Finally, Non-Annex I countries cover all the remaining parties that are neither Annex I countries nor LDCs. These consist of most of the world’s developing economies.

Initially, the aim of the framework was for all Annex I countries to stabilize their greenhouse gas emissions at 1990 levels by the year 2000.

However, at the first COP meeting in 1995, it was determined that the goals originally set out by the UNFCCC were insufficient to combat the effect of climate change caused by human activity.

Eventually, this would lead to the establishment of the Kyoto Protocol in 1997, an extension of the UNFCCC’s original framework.

What’s the Kyoto Protocol?

The Kyoto Protocol was an extension of the United Nations Framework Convention on Climate Change (UNFCCC) that was first signed in Japan in 1997.

Originally implemented because the UNFCCC’s greenhouse gas emissions targets were deemed insufficient to counteract the effects of human-driven climate change, the Kyoto Protocol was ratified late in 2004 and came into force in 2005.

The Kyoto Protocol laid out both emissions reduction targets for all its participating countries, as well as a timeline for achieving said reductions. The Kyoto Protocol also formed the first basis for a global carbon credit market by implementing a mechanism that would allow for signatory countries polluting over their targets to offset their excess emissions by purchasing allowances from other countries. Participating countries could also offset their excess emissions by funding emission reduction projects in other countries.

A total of 37 countries, including nearly all Annex I countries, participated in the first commitment period running from 2008-2012. Notably, the U.S. did not ratify the Kyoto Protocol, and Canada initially did but later withdrew from the treaty in 2011 without meeting its target.

Of the remaining 36 countries, all of them were able to meet their emissions reduction goals, though 9 of those 36 had to rely on offsetting mechanisms in order to do so.

Still, despite these efforts, global emissions of carbon dioxide rose 60% between 1990 and 2013.

At the end of COP18 in 2012, an amendment to the Kyoto Protocol was agreed upon, which created a second commitment period that would run through the end of 2020. However, at this point the Kyoto Protocol was a 15-year-old treaty and criticized as being outdated; the second commitment period only covered approximately 11% of global greenhouse gas emissions.

While the Kyoto Protocol had indeed resulted in a reduction in greenhouse gas emissions in several countries, it was considered insufficiently binding and not adequately effective in meaningfully reducing global emissions. At the same time that an extension to the Kyoto Protocol was decided upon, an agreement was also reached that a successor to the Protocol was needed.

A deadline of 2015 was set for this new agreement to be adopted. And in 2015, at COP21 held in Paris, France, the Paris Agreement would come to supersede the Kyoto Protocol.

What’s the Paris Agreement?

The Paris Agreement, also known as the Paris Climate Accords, is the most recent international climate change treaty. Drafted at the end of 2015 and first signed in April 2016, the Agreement became effective in November 2016.

As of October 2021, only five countries in the world have yet to ratify the Paris Agreement: Eritrea, Iran, Iraq, Libya, and Yemen. While the U.S. under President Trump briefly withdrew from the Agreement in 2020, the country rejoined under President Biden in 2021.

Though the Paris Agreement is considered the successor to the Kyoto Protocol, it’s a separate entity from the Protocol, which expired at the end of December 2020.

One marked distinction between the Paris Agreement and the Kyoto Protocol is that instead of just Annex I countries, every country must submit a plan to reduce its emissions – a Nationally Determined Contribution (NDC). As a result, even developing, non-Annex I countries must submit emissions reduction plans under the Agreement.

Unlike the Kyoto Protocol, the Paris Agreement doesn’t cover specific commitment periods, but instead operates on rolling five-year cycles. The first cycle began in 2020, with 113 NDCs submitted, and new NDCs must be submitted every five years. Each subsequent NDC must also contain more aggressive emissions reduction targets than the last.

However, currently there’s no legally binding component of the Agreement that forces countries to set a certain target level for their emissions reductions. As a result, it’s currently projected that the world will not reach the Paris Agreement’s max 2°C temperature increase goal based on the current submitted NDCs.

While there is a mechanism in the Agreement to increase emissions reduction targets over time, one criticism of the Paris Agreement is that like its predecessor, the Kyoto Protocol, it doesn’t do enough. Still, it’s definitely a significant step forward in the fight against climate change, and already the Paris Agreement has been used in legal action, most notably in the Netherlands.

One Article of the Paris Agreement that hasn’t been fully implemented yet is Article 6, which governs the structure of carbon credits and carbon offsets. Article 6 is at the top of every country’s agenda at COP26. Once realized, Article 6 would solidify the foundation for an international carbon credit market that was first laid out in the Kyoto Protocol, leading to the establishment of a UNFCCC-compliant regulated carbon market.

Australian Carbon Offset Prices Surge, Jumping 75%

Carbon Credits
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Australian Carbon Offset Prices Surge, Jumping 75%

In a race to meet emissions levels set by the Australian government, industries have rushed to purchase AACU carbon credits, causing offset prices to jump 75%. Prices are currently at an all-time high of $29.50 (up from $16.52 at the start of 2021).

The COP26 summit, which is scheduled to start at the end of this month, is another reason behind the surge. Most nations feel behind on meeting targets, so credits have become limited as more and more purchases occur. For example, EU carbon prices have soared this year as well, costing $69.39 per ton.

ACCU’s are issued by The Clean Energy Regulator, which is expecting to issue 17 million ACCUs this year (an increase from 16 million last year). Though there is a shortage now, ACCU anticipates growth as they partner with farmers for reforestation and soil carbon projects. Carbon capture and storage projects have also been approved to generate credits.

The global carbon market is expected to reach $22 trillion by 2050, which isn’t surprising. Carbon credits provide an opportunity to offset emissions, improve the environment, and spark economic development, which is why international interest has increased.

According to Bret Harper, the Director of Research for Reputex – Australia’s leading provider of research, pricing, and advisory services for the local energy and environmental markets, “There’s unanticipated demand creating a scramble for credits.”

Harper went on to say that the “Demand for these credits just keeps going up and up and up as more entities realize what it’s going to take to get to net zero. I think demand will do nothing but increase broadly.”

There’s no doubt that technological advances are needed to reduce carbon emissions. However, when innovation, regulation, and carbon offsets work together to achieve net-zero emissions, the world’s 2050 goals may very well be possible.

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