COP 28 has shown the world that the issue of climate change should not be just a tick box exercise rather the whole world needs to be concerned about it with their commitments and actions towards achieving net zero goals by 2050. With such growing concerns about the seriousness of the issue one has to give attention towards the growing carbon credit markets around the world as well which has been witnessing growth from nearly $2 billion in 2022 to nearly $100 billion by 2030, and as much as $250 billion by 2050, according to Morgan Stanley.
Moreover, as businesses commit to become more responsible towards environment, their commitment to immediate climate action is only authenticated when they take actions to reduce their carbon footprint either by directly taking initiatives such as by planting trees and by deploying renewable power or by using carbon offset mechanism managed by authorized carbon registries in the developed world mostly. The role of carbon credit validator also becomes important as there has to be a reliable third party who would ensure that every penny spent to reduce global carbon footprint is used in verified projects or initiatives.
Furthermore, policy makers around the world are actively engaging with relevant stakeholders so as to ensure that there is a supportive regulatory environment for carbon credits market such that buyers, sellers and validators can easily interact with each other with uniquely identifiable documents and transactions in the marketplace. Also with rapid digitization in the financial markets, this financial instrument of carbon credits is also suitably being tokenized through block chain technology resulting in having faster buying-selling solution to the market players.
However, with all such developments one also needs to be cautious about vulnerability of this financial instrument towards misuse in global markets as precautionary measures such as credibility of validators or genuineness and uniqueness of the instrument need to be checked.
By Syed Adeel ur Rahman