· 3 min read
Carbon markets were designed to enable least-cost emissions reductions - letting emitters pay for cheaper cuts/removals elsewhere instead of reducing their own emissions. In theory, that sounds efficient. In practice, it's one of the most dangerous misconceptions in climate policy.
Carbon credits/offsets assume that continued emissions can be balanced by reductions elsewhere. That assumption only holds in a nearly decarbonized system with limited “residual” emissions. That’s not the world we live in. Every ton of GHG emitted today warms the planet. Financing a forest doesn’t “cancel” that out—we need that *in addition to* decarbonizing, not instead of it.
Credit markets are also built on false equivalences:
• btw permanent fossil emissions and temporary biological storage, and
• btw accounting claims and actual atmospheric outcomes.
Carbon markets bypass the coordination & investment needed to actually transform our carbon-intensive systems: power grids, transport networks, industries. Revenues from carbon markets are short-term & marginal; they can't fund transformations in energy, mobility, or industry. That they have become a centerpiece of “climate finance” is a profound failure of the global financial system. Instead of fixing the structural barriers that keep capital from flowing where it’s needed, we’ve left the world’s most climate-vulnerable countries dependent on unreliable, project-based revenue, while enriching intermediaries.
Why are carbon markets growing so fast?
Because they are politically and financially convenient. Governments can claim progress without actually phasing out fossil fuels. Companies can claim “net zero” while continuing to pollute. And financial intermediaries gain a new "green" asset class.
Real decarbonization, by contrast, requires coordination: countries working w/neighbors to decarbonize shared energy systems, and industries collaborating across borders to transform sectors like steel, shipping, and cement. NDCs and corporate net-zero plans, built on the same accounting logic, ignore both the physics and the reality that no country or company can decarbonize alone. Carbon markets offer an easier "out" - traded credits instead of transformed systems.
Unless we sharply reduce emissions at the source, no amount of trading/claiming/crediting keep us w/in safe planetary boundaries.
In truth, carbon markets have little to contribute to the core task of decarbonization. At best, tightly governed compliance markets can play a limited role in capping emissions w/in a rapidly declining budget. But voluntary and offset markets—the ones growing fastest—do the opposite: they let pollution continue under the pretense of progress. As long as we treat trading carbon as a substitute for transforming systems, carbon markets will keep growing for political convenience, while violating basic atmospheric physics and driving higher net emissions.
This article is also published on author's blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
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