- Explores the development trajectory and possible outcomes for carbon markets through scenario-based analysis
SINGAPORE – 12 April, 2024 – GenZero, a Temasek-owned investment platform company focused on accelerating decarbonisation globally, has launched a paper examining possible future pathways for carbon markets and the role of carbon finance in accelerating climate action.
Titled ‘GenZero Carbon Scenarios – An Exploration of the Future of Carbon Markets’, the paper aims to unpack the complexities of the carbon market landscape. Carbon pricing is an essential tool to accelerate climate action, and carbon markets are a flexible and effective way to put a price on carbon. However, the outlook for carbon markets is highly uncertain. By examining the driving forces shaping carbon markets, the scenarios help to reveal assumptions and stretch the thinking about how carbon markets could look like in the future. The scenarios could also encourage discussions around no-regrets actions that can enhance the impact of carbon markets, irrespective of how they evolve.
Frederick Teo, CEO, GenZero, said: “We need greater clarity on the factors that are shaping the future of carbon markets. The GenZero Carbon Scenarios explore the underlying drivers that could shape the trajectory of carbon markets. We hope the insights are useful in encouraging discussion around key actions that can develop a more effective carbon market to support global decarbonisation.”
Scenarios and Strategic Imperatives
The paper discusses three possible scenarios for carbon markets: Green New World, Sustainably Divided, and Resilient Islands. These scenarios are not predictions or forecasts, but instead narratives about possible futures to help stakeholders understand how key driving forces can impact outcomes differently. This can help industry participants chart out strategies and take actions to be more future-ready. All three scenarios contain opportunities and challenges of their own.
| Green New World Climate Theocracy |
Sustainably Divided Climate Diplomacy |
Resilient Islands Climate Autonomy |
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The scenarios reveal five key takeaways about carbon markets:
- Carbon markets are likely to remain a key lever for climate action but could look very different depending on how quickly and cooperatively we decarbonise.
- In the absence of harmonised quality standards, shared quality principles are essential to accelerate investments and confidence in carbon projects.
- Carbon markets can provide a neutral platform to facilitate collaboration on climate action even amidst broader tensions.
- Low-integrity projects can have outsized negative impacts and hold us back from delivering sustained impact at scale.
- Narrow quality definitions can potentially hinder the development of many carbon project types and the broader carbon markets to incentivise near-term decarbonisation.
Consequently, the paper proposes three strategic imperatives for carbon market participants. These include:
- Supporting the development of regulatory oversight in carbon markets.
- Providing clarity on the role of carbon markets in decarbonisation pathways.
- Leveraging digitalisation as a tool to enable integrity at scale and restore confidence.
“It is critical to get the carbon market on the right track. Not doing so can have immense repercussions on our ability to address climate change. Across all possible scenarios, the importance of regulatory support and meta-standards continues to be a unifying thread underpinning the global pathway to net zero. We need to develop a principles-based approach to deliver transparency, integrity, and alignment across the carbon ecosystem. We need a concerted effort across governments, private sector and civil society to help harmonise initiatives, ensure continued progress and secure the success of carbon markets for the future,” added Teo.
To view the full report, please visit the page https://genzero.co/carbon-scenarios/.
