Complexities of Carbon Markets

How we measure carbon production and then trade it in both compliance and the voluntary markets is often both scarily inaccurate or overwhelmingly complex.

The standard comparison tool for different greenhouse gases is to convert them using an equivalency metric into a CO2 value.  The most widely used is called the Global Warming Potential concept and evaluates the comparative integrated forcing of gases into the atmosphere over a set period of time, usually 100 years (Edwards and Trancik 2014). Global Temperature Change Potential is further variation to this method and expands the cause effect relationship by defining the mean surface temperature change resulting from the emissions pulses (Myhre et al. 2013).
 
Several alternatives have been proposed as it is suggested that the aforementioned methods do not fully take in account uncertainties about the future climate scenario and also often underestimates the impact of CH4releasing technologies, especially when climate thresholds are approached (Edwards and Trancik 2014).
 
Estimations of carbon emissions using narrowly defined protocols are usually under the real value of the actual footprint of the product or service analysed as they do not take into account the full supply chain life cycle.  Power generation, cement manufacturing and transport are sectors where most of the emissions lie within scope 1 and 2.  Most other sectors have their footprints mostly coming for their upward or downward supply chain and so have higher scope 3 emissions.  Industries that only assemble or modify large amounts of components are good examples of this as the direct emissions from their operations make up only a small proportion of the overall footprint of the products they sell, once manufacturing and delivery is considered (Mathews et al. 2008).
 
Carbon calculators are an example of a personalised approach to help environmental behavioural change; but looking at research by Buchs et al. (2018) have been shown to have only limited long-term effect on reducing CO2 footprints of participants.  Calculators do however improve awareness by allowing people to obtain more personalised information on their lifestyle impacts, make connections between actions and emission and also enable people to track progress made.  

There are currently a large number of websites offering calculators as this is a cost-effective way of personalising information and making the environmental message less general.  It is also a way of governments understanding whether individuals will adopt behavioural changes voluntarily or more policy intervention is required.  More cynically it could be seen as a way of private companies attracting more site visits and selling their greener product variants or indeed a way of fossil fuel companies shifting the responsibility  focus away from polluting sectors onto an individual highly consumption reduction is needed, not systematic change.

So once we establish a footprint on both an individual, business or societal scale what role do carbon markets play in regulating this?
 
Emission trading systems have been controversial as they have often failed to put an accurate value on the real externalities of carbon emissions and have in some instances provided windfall profits to companies in the energy sector who benefited from free allocation of allowances (Newell et al. 2014). This has been coupled with severe leakages where high carbon activities have just been transferred outside of scheme boundaries or indeed fictitious accounting where carbon have been artificially inflated so that credit can be obtained when levels are lowered once again (Cullenwood and Wara 2017). 
 
Any new system should try and tackle these above issues and ideally be closely linked and homogenous to prevent switching between markets.  Schemes should also avoid any clash with other mitigation policies to ensure the price is an accurate reflection of excess carbon in the market (Newell at al. 2014).
 
The voluntary offset market can potentially fill a space that the larger UNFCCC CDM projects cannot deliver due to their increased bureaucracy (Wang and Corson 2015), higher costs and verification requirements and also their lack of flexibility and diversity (Wylie et al. 2016). They can be successful at provide small scale, locally led sustainability objectives – such as ecosystem blue carbon projects and furthermore act as a cost-effective testing ground for new concepts and procedures (Wylie et al. 2016).
 
The contribution can be strengthened by ensuring that the low-income countries that these projects not only benefit sustainable development in low income regions but also ensures that not all financial benefits stemming from carbon credits are lost through transfer of property rights to the global north (Wang and Corson 2015).  

​References
Edwards, M. R. and Trancik, J. E. 2014. Climate impacts of energy technologies depend on emissions timing. Nature Clim. Change, 4, 347-352. 
 
Matthews, H.S., Hendrickson, C.T., Weber, C.L., 2008. The importance of carbon 
footprint estimation boundaries. Environmental Science & Technology 42, 5839- 5842. 
 
Büchs, M., Bahaj, A. S., Blunden, L., Bourikas, L., Falkingham, J., James, P., 
Kamanda, M. and Wu, Y. 2018. Promoting low carbon behaviours through personalised information? Long-term evaluation of a carbon calculator interview. Energy Policy, 120, 284-293. 

 
Myhre, G., Shindell, D., Bréon, F.-M., Collins, W., Fuglestvedt, J., Huang, J., Koch, D., Lamarque, J.-F., Lee, D., Mendoza, B., Nakajima, T., Robock, A., Stephens, G., Takemura, T. and Zhang, H. 2013. Anthropogenic and Natural Radiative Forcing. In: Stocker, T. F., Qin, D., Plattner, G.-K., Tignor, M., Allen, S. K., Boschung, J., Nauels, A., Y. Xia, V. B. and Midgley, P. M. (eds.) Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press: Cambridge, United Kingdom and New York, NY, USA. 

Newell, R. G., Pizer, W. A. and Raimi, D. 2014. Carbon Market Lessons and Global Policy Outlook. Science, 343, 1316-1317. 

 
Cullenward, D. and Wara, M. 2014. Carbon markets: Effective policy? Science, 344, 1460. 

 
Newell, R. G., Pizer, W. A. and Raimi, D. 2014. Carbon markets: Effective policy? — Response. Science, 344, 1460-1461. 

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Wang, Y. and Corson, C. 2015. The making of a ‘charismatic’ carbon credit: clean cookstoves and ‘uncooperative’ women in western Kenya. Environment and Planning A: Economy and Space, 47, 2064-2079. 

 
Wylie, L., Sutton-Grier, A. E. and Moore, A. 2016. Keys to successful blue carbon projects: Lessons learned from global case studies. Marine Policy, 65, 76-84.