Greenhouse Gas markets

This solution was shared by PRE-LAUNCH RESEARCH TEAM , 14 May 2021

Print date: 06 December 2024 17:33

Description of the innovative solution

Finance Trade policy Tax Agricultural development Procurement policy

Greenhouse gas markets, also known as cap-and-trade policies, are proposed as a solution to mitigate climate change in a way different from more traditional regulatory or voluntary mechanisms for reducing emissions. Cap and trade involves the establishment of a limit for total amounts of a pollutant by a regulatory group, and the distribution of this total in the form of allowances to the various polluters. In theory, with the right 'cap,' this will force a reduction in emissions. The 'trade' aspect is intended to make this reduction of emissions more efficient, letting firms that are better able to reduce emissions do so, and rewarding them, with the ability to sell their permits to those who are less able to reduce emissions. The agricultural sector could participate in these markets by, for example, using methods that sequester carbon, and selling these benefits on the market.

Primary users

Natl. Govt - Ministries of Environment
Natl. Govt - Ministries of Economics
Natl. Govt - Ministries of Trade
Global Financial Institutions
Natl. Financial institutions

Dietary impact

Climate change poses significant threats to the resiliency of food systems, whether local, national, or global. It exacerbates the already troublesome agricultural issues of desertification, disease, environmental degradation and biodiversity loss, water shortages, soil erosion, and pest control. In attempting to mitigate climate change, greenhouse gas markets could prevent the worsening of these stressors on food systems, and thus safeguard the dietary health of those who depend upon them.

Planetary impact

Climate change threatens all ecosystems and the people, animals, plants, and other organisms that are a part of them. Cap-and-trade policies can help to reduce greenhouse gas emissions and thus mitigate the potential negative impacts of climate change - reducing the loss of biodiversity, slowing sea-level rise, etc. For instance, while deforestation is a great source of emissions and thus a significant direct contributor to climate change, it also takes a huge toll upon the local ecosystem and local communities. Dramatically reducing deforestation through these types of market incentives represents the type of significant impact that this solution could have over the next decade.

Equity impact

Communities and individuals can potentially stand to benefit from engaging in these greenhouse gas markets. Farmers, for instance, can earn additional income on top of their profits on crops by using regenerative practices that keep carbon in the ground, and selling this as an offset. In addition, the disproportionate effects of climate change upon countries and communities that have not greatly contributed to the emissions that cause it can potentially be prevented or lessened through reducing emissions as cap-and-trade aims to do. In other words, this could potentially help combat climate injustice down the road.

Main concerns

While cap-and-trade may help reduce emissions in the short-term, there are concerns that it is less effective at driving more long-term reductions in fossil fuel consumption. Likewise, it is unclear that these policies would drive technological innovation into new and alternate sources of energy and electricity. In order to truly maximize the impacts of this type of solution, it should be implemented along with multiple other approaches in parallel to affect positive change in efficient and equitable ways.

Supply chain segment

Financial aspects

Maturity level

Moving to scale

Criteria

Climate mitigation

SDG target

SDG 13: Climate Action

Context

Rural

Examples and additional resources

Real-world examples

See this solution in action in different contexts and settings around the world

Carbon Markets in Asia Paper

Policy information

Paper detailing the carbon markets of the major Asian economies: Japan, the Republic of Korea, and particularly the People's Republic of China

China Japan Korea, Republic of

hdl.handle.net/10419/.../222754

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Additional resources

Learn more about this solution through studies, articles, business cases, and other information

Emissions trading worldwide International Carbon Action Partnership (ICAP)

Scientific paper

ICAP's Emissions Trading Worldwide Status Report 2021 shows significant growth in the coverage of emissions trading systems (ETSs) with the launch of the China National ETS.

icapcarbonaction.com/en/...2021