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Welcome to another edition of The Green Executive Briefing. In under 10 minutes, you’ll be fully updated on the latest happenings in Sustainability and ESG every Tuesday at 8am EST. 🌎

We sift through a vast array of articles and data from trusted sources, distill the information, and present it to you in simple, bite-sized pieces every week. 🌍

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Compliance Carbon Markets:

• 36+ emissions trading schemes operate globally, covering ~18% of global greenhouse gas emissions

• EU ETS leads by market value, while China operates the largest system by emissions coverage

• Prices vary significantly across jurisdictions due to different supply and demand dynamics

More Readings

1. The Green Executive Briefing - Green Executive Pro Training 

2. MSCI Understanding Carbon Markets

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Mason Corliss
Founder, Terralyn

Want to get featured in the spotlight? Reply to this email: [email protected]

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Intro

🌍 The Growing Importance of Carbon Markets in Our Net-Zero Future

As we face the mounting urgency of climate change, carbon markets have emerged as a critical tool for accelerating global decarbonization. MSCI's latest comprehensive guide reveals how these markets are evolving from niche mechanisms to essential infrastructure for achieving net-zero goals.

Main

📌Two Paths, One Goal: Understanding Market Types

Compliance Carbon Markets

Government-mandated systems like the EU Emissions Trading System (ETS) set hard caps on emissions, requiring companies to hold allowances for each tonne of CO₂ they emit. Key highlights:

• 36+ emissions trading schemes operate globally, covering ~18% of global greenhouse gas emissions

• EU ETS leads by market value, while China operates the largest system by emissions coverage

• Prices vary significantly across jurisdictions due to different supply and demand dynamics

Voluntary Carbon Markets

Corporate-driven initiatives where companies voluntarily purchase carbon credits to meet climate commitments:

• 336 million tonnes of carbon credits were issued in 2023

• 180 million tonnes were retired (used) by companies

• Supply currently exceeds demand, creating a surplus of over 1 gigatonne

📌 The Quality Revolution: Raising Standards for Carbon Credits

What Makes a High-Quality Carbon Credit?

The market is undergoing a fundamental shift toward integrity, with new standards emerging:

Essential Criteria:

• Additionality: Would the emission reductions have happened without carbon credit financing?

• Permanence: Will the reductions remain permanent over time?

• Quantification: Are the emission reductions accurately measured?

• Verification: Has the project been independently validated?

The Integrity Challenge

Current market analysis reveals concerning quality gaps:

• Only 7% of projects receive the highest integrity ratings (A-AAA)

• 47% of projects fall into the lowest quality categories

• Higher-integrity projects command premium prices, with a one-point improvement in integrity score associated with an 8% price increase

Main

📌 Corporate Leadership: Who's Leading the Charge?

Surprising Findings on Carbon Credit Users

Research reveals that companies actively using carbon credits are often climate leaders, not laggards:

Material carbon credit users outperform non-users:

• Reduce absolute emissions 2x faster (3.6% vs 1.5% annually)

• 92% have set climate targets vs 52% of non-users

• More likely to have externally validated targets

Industry Leaders

Top sectors by credit retirement (2021-2023):

• Fossil fuels: 31%

• Transportation: 18%

• Services: 15%

• Manufacturing: 13%

Main

📌 Investment Opportunities in a Growing Market

Market Growth Projections

The voluntary carbon market could expand dramatically:

• Current market value: ~$1.1 billion (2023)

• Projected growth: $10-40 billion by 2030

• Driver: 3,600+ listed companies have pledged net-zero commitments

For Investors

Carbon markets offer multiple engagement opportunities:

• Direct investment in carbon credit projects

• Portfolio assessment of companies' carbon strategies

• Risk management through exposure to carbon pricing

• Impact investing in natural capital and climate solutions

Navigating the Regulatory Landscape

Increasing Disclosure Requirements

New regulations worldwide are mandating carbon credit transparency:

Key Jurisdictions Implementing Disclosure Rules:

• EU: Corporate Sustainability Reporting Directive (2024)

• US: SEC climate disclosure rules (2026)

• California: Enhanced disclosure requirements (2025)

• Multiple Asian markets: Various timelines through 2025

Claims and Communications

The era of simple "carbon neutral" claims is ending:

• EU bans carbon neutrality claims based on offsets (2026)

• New claim frameworks emerging (VCMI tiers, contribution claims)

• Focus shifting from offsetting to "beyond value chain mitigation"

Looking Ahead: What's Next for Carbon Markets

Key Trends to Watch

Technology Evolution:

• Growing focus on engineered carbon removal (direct air capture, biochar)

• Satellite monitoring improving verification capabilities

• Blockchain platforms enhancing transparency

Market Infrastructure:

• Standardized contracts reducing transaction complexity

• Insurance products protecting against quality risks

• Exchange trading increasing liquidity

Policy Development:

• Article 6 implementation under the Paris Agreement

• CORSIA requirements for aviation industry (2027)

• National carbon pricing expansion globally

WRAPPING UP

🔮 CLOSING THOUGHT: The Bottom Line

Carbon markets are at a critical inflection point. While challenges around quality and claims persist, the convergence of increasing climate ambition, improving standards, and growing corporate leadership is creating unprecedented opportunities for credible climate action.

For companies and investors, the key is understanding that carbon markets are not just about compliance or offsetting—they're about accelerating the global transition to a low-carbon economy while supporting sustainable development worldwide.

The organizations that master carbon market navigation today will be best positioned to thrive in tomorrow's carbon-constrained world.

P.S. When you’re ready, here’s how I can help you:

1. Download our Dashboard GHG Accounting Scope 1, 2 & 3. Customize it with your organization's numbers to build a compelling business case.

2. Refer 2 other sustainability leader (see “Click to Share” button below)

3. Book a Consultation: Click HERE

   1. GHG Accounting Strategies (Scope 1, 2 & 3) 

   2. ISO 14001 Compliance (Environmental Management)