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Carbon credit speculators could lose billions as offsets deemed ‘worthless’

By illuminem briefings 🌎

Aug 25 2023 · 1 min read

Illuminem Voices
Carbon Market · ESG · illuminemX

illuminem summarizes for you the essential news of the day. Read the full piece on The Guardian or enjoy below

🗞️ Driving the news: Carbon credit speculators face potential billion-dollar losses as many credits appear to lack environmental value, leaving them as stranded assets
• Market research indicates an unused accumulation of carbon credits in the unregulated voluntary market, equal to Japan’s yearly emissions

🔭 The context: Leading companies, such as Apple, Disney, and Shell, have relied on these credits for their sustainability agendas, purchased from the unregulated voluntary market
• Recent scandals and increased regulatory attention have suppressed demand and offsetting prices

🌎 Why does it matter for the planet: Carbon credits, particularly those connected with stopping deforestation and fostering renewable energy projects, are promoted as essential for achieving the Paris agreement's goals
• But their real impact is now in question, threatening their validity and role in global climate change mitigation

⏭️ What's next: The US derivatives market regulator is addressing potential misconduct in carbon markets and has established a new environmental fraud task force
• Market players like Anton Root from AlliedOffsets predict a potential market correction to prioritize quality

💬 One quote: "Coming from oil trading, it is strange to see units in carbon markets become invalid overnight. The carbon market needs to be progressive and contracts need to anticipate that." -(Hannah Hauman, global head of carbon trading at Trafigura)

📈 One stat: The unregulated voluntary carbon market grew to a staggering $2bn (£1.6bn) in size in 2021, with many carbon credits priced above $20 per offset

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