Global Carbon Markets Through Private-Government Partnership

Editor’s Note: This article is one submission in a live Masdar blogging contest. Very simply, the focus of the contest submissions is to answer the question: “In your view, what are the policies that governments should take to encourage public-private partnership and enable the private sector to develop the goods and services necessary for a global transition to a low-carbon economy by 2030?”

The Paris climate change agreement has paved the way for a comprehensive reduction in greenhouse gas emissions, with an ultimate target to restrict the rise in global temperature by 1.5 or 2 degrees C. 

Such a huge target, however, cannot be achieved by actions of the governments alone. Bureaucracy tends to move much too slowly to yield timely and efficient results. Thus, an equal, if not greater, responsibility falls on the private sector.

A number of countries have implemented direct policies and programs to have industries reduce their GHG emissions. Some of the most well known are the European Union and New Zealand. Emissions trading schemes or cap-and-trade programs in these jurisdictions have been operational for some years now, with varying degrees of success in reducing GHG emissions. 

However, these programs and schemes were implemented following years of discussions and arguments. In both the jurisdictions, disagreement over the future of the respective programs continues. 

Global disagreement over inclusion of the international aviation industry into the European Union emissions trading scheme is one of the prime examples of how differences in opinions and approaches can lead to delay in effective implementation of low-carbon initiatives. The delay in expansion or further improvement in the cap-and-trade schemes has led some to push for self-regulation by the industry. 

Already, a number of companies across sectors have started taking initiatives to reduce their direct and indirect GHG emissions. Several private sector companies, like Microsoft, have introduced an internal carbon price. Such initiatives inspire employees to track and keep a check on emissions from their activities.

Several funds, banks, and financial institutions have announced plans to reduce their exposure and investments in carbon-intensive assets. Such decisions by funding agencies also push companies to increase investment in low-carbon assets. 

An increasing number of companies are also monitoring and reporting their GHG emissions under the Carbon Disclosure Project. Companies are voluntarily sharing data on emissions, energy consumption, and other parameters. The Carbon Disclosure Project ranks such companies on the basis of transparency and efforts taken to reduce emissions every year. 

Industrial associations can play a major role in encouraging companies to monitor, report, and take measures to reduce GHG emissions. 

The International Civil Aviation Organisation and the International Maritime Organisation have long opposed any UN-backed action to reduce their GHG emissions. They have instead implemented their own measures to improve energy efficiency. However, the world now expects them to implement market-linked measures that directly reduce GHG emissions. While the Paris climate change agreement has not proposed any emission reduction targets or programs for the aviation and shipping sectors, the industrial associations can proactively propose measures to implement a price on carbon.

Apart from acting on GHG emissions, private sector companies are playing a pioneering role in increasing the use of renewable energy. Companies are looking to set up in-house power generation capacities based on renewable energy to reduce their carbon footprint and reduce energy dependence on fossil fuels. Some of the leading global companies, like Google, Apple, Amazon, and Facebook, have announced grand plans to increase use of renewable energy.

From the measures already taken by the private sector and those expected in the near and medium term, it is clear that governments around the world will have to partner with private companies to achieve low-carbon goals.