Mostafa Monira Firdouse, Green Finance Advisor. Friends of the Earth (HK)

The carbon market has had its fair share of struggles over the years. For instance, when the EU Emissions Trading Scheme kicked off in 2005, it didn’t really deliver on cutting emissions as expected. On the contrary, by 2012, carbon prices crashed due to oversupply, making many projects financially unviable. Fast forward to 2023, and reputation risks took center stage when reports showed that over 90% of certain forestry credits didn’t actually reduce emissions. This has led many companies to rethink their purchases. None of the initiatives seems to have worked.

Why? What is missing in the mechanism?

Text Box: Carbon Market Trajectory

Among the setbacks facing carbon markets, top identified challenges predominantly come from macro market situation. Price volatility, pricing mechanism, international/cross-border regulation and financial policy are a few major challenges.

However, climate change is real, and carbon emission does not maintain any boundary to disrupt billions of people, biodiversity loss, malnutrition, job loss and all sorts of uncertainty. Which eventually promotes financial, social and political crimes.

Text Box: So, is it ambitious to understand that climate change and carbon emission does not maintain any boundary? Is it hard to believe that restoring biodiversity is the only way of shared prosperity, which will not come without ensuring carbon pricing?

THE Missing Piece of Carbon Valuation Model – Carbon as Currency

Recommendations

  1. Introduce carbon as currency.
  2. Bring Financial Institutions as agent to play central role, regulated by Central Banks.
  3. Develop new trading products to ensure everyone get equal opportunity and gain fare share.
  4. Tie carbon currency as political benefit to ensure circularity.

Beneficiaries:

  1. Global leaders will be crowned to next generations.
  2. FIs can be profit making not only through social trust, but guaranteed by nature. New financial & carbon product will breed to provide funding for carbon offset projects that need support to grow.
  3. Accounting system will finally be able to see the light, be in better shape to ensure procurement, tax, profit & loss and healthy balance sheet.
  4. Financial benefit will go directly to the beneficiaries – people & nature.
  5. Soil nutrition can be restored and reduce biodiversity loss, food insecurity and price volatility.

Do you think the above suggestions are impossible to achieve? Provide your opinion in the comment section.

Keep an eye on my next interesting article, till then, ADIOS!

Published by foehk@foe.org.hk