Carbon Markets

Carbon markets – the simple and the not so simple

Have you ever been told that carbon markets/trading are an inherently complex/complicated1 topic that only experts understand? Well, you’ve been lied to. Twice! In a single sentence!

The first lie is that the matter is inherently complex/complicated. Explaining what carbon trading is, or even what a carbon market entails, is, in fact, surprisingly simple:

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

That’s it! Even carbon offset certifications are easy to explain:

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

So, it needs to be clear that if there is anything complex/complicated with carbon markets is not because the matter is inherently difficult to grasp.

What is complex/complicated is the governance of carbon markets due to, at least partly, our inability to reach consensus on what the ideal carbon market looks like. As a result of the lack of consensus there is no global carbon market but many “parallel markets operating under the same conceptual basis, but with different governance structures”.2 Many, many! Around 50 at my last count, based on the last count by the World Bank’s Carbon Pricing Dashboard and the existence of some voluntary sub-markets not covered in said dashboard.

That’s where the second lie happens. Because even experts don’t understand the governance of carbon markets.

Not that I do!

One would need to be an omniscient computer to be able to grasp all the governance-induced interconnections and inter-linkages.

So, there you go, don’t let them scare you away next time you’re told that carbon trading or carbon markets are complex/complicated. They are only talking about the governance of carbon trading rather than the idea as such. And even they don’t fully get it.

Ps!!! I’m being a bit sensationalist here. Not all experts will scare you away. Those that truly ‘know their stuff’ will accept their limitations and try to include you in the process of debating improvement.

  1. check my theory(ish) note on the nuances of the word ‘complexity’ to understand the differences any why I can’t decide which word to use
  2. Bumpus, A. G., & Liverman, D. M. (2008) Accumulation by decarbonization and the governance of carbon offsets. Economic geography, 84(2), p. 128.