UN’s Carney says carbon offset market has become imperative

UN Special Envoy for Climate Action and Finance Mark Carney Image: Bank of England

Former Bank of England Governor Mark Carney said it’s imperative the market for carbon offsets be built into something much larger to help achieve net-zero global emission targets.

During an online panel discussion hosted by the Institute of International Finance, Carney, who’s also the UN Special Envoy for Climate Action and Finance, said the market – currently at about $300 million – should be “measured in the tens of billions of dollars per annum.”

The market for carbon offsets, while “complex,” will be “a very major component” of the climate solution, Carney said.

Carbon offsets are used by individuals and companies to compensate for their carbon footprints. Each credit is supposed to be backed up by activities that reduce emissions like forest conservation or the promotion of cleaner-burning wood stoves. But those projects are so varied that it’s difficult for buyers to determine the value of carbon saved from different initiatives. It’s also not clear how much money actually goes to the pollution-saving pursuit and how much goes to the broker that sells the offset.

Standard Chartered plc chief executive officer Bill Winters, who also spoke at the IIF conference, is chair of an industry taskforce looking to boost credit offsets, with more than 40 members including, BP plc, Royal Dutch Shell plc and Unilever NV. The panel estimates the market needs to grow by between 15 and 160 times in order to meet the Paris Agreement that set a target of limiting global warming to 1.5 degrees Celsius.

“We haven’t made much progress as a practical matter, and at least one big reason for that is that we haven’t harnessed private markets to the fullest extent,” Winters said during the IIF panel.

Sustainable finance has become a core business for most banks and fund managers in recent years in part because they face growing pressure from clients, employees and the public to demonstrate they’re contributing to a fairer and greener society. It’s also an appealing business opportunity: The transition to a lower carbon world will require trillions of dollars of investment in renewable energy, electric vehicles and a host of related technologies and infrastructure.

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