Certifications Public Policy

Carbon markets—simple yet not simple

In many ways, carbon trading and carbon markets are not as complicated as many believe.

Explaining what carbon trading is, in fact, is surprisingly simple:

An actor (A) pays a second actor (B) so that (B) undertakes projects that compensate for the pollution made by (A).

Carbon offset certifications are also easy to explain:

A third actor (C) that confirms B is compensating exactly what A is paying for (no more, no less).

So, at the foundation, carbon trading/markets are not complicated.

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What is complex/complicated is the governance of carbon markets.

As a result of the lack of consensus there is no single global carbon market but many “parallel markets operating under the same conceptual basis, but with different governance structures”.1 Many, many! Around 50 at my last count, based on the last count by the World Bank’s Carbon Pricing Dashboard.

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So, simple in theory, complex in practice.

  1. Bumpus, A. G., & Liverman, D. M. (2008) Accumulation by decarbonization and the governance of carbon offsets. Economic geography, 84(2), p. 128.