–U.K. to give boost to global carbon markets
By Mathew Carr
Dec. 3-4, 2020 — LONDON: Climate activist Greta Thunberg was at her powerful best when she asked the world’s leaders “How dare you” not take the climate crisis more seriously?
Now, Britain’s rising to the challenge, adopting an emissions target that’s the most ambitious of any major economy and seeks to cooperate with poorer nations via carbon markets.
Placing the EU under some Brexit pressure, the Prime Minister Boris Johnson wants to cut emissions by at least 68% by the end of the decade versus 1990 levels. It was previously about 61%. It would probably mean a faster switch away from natural gas boilers for home heating and many other big shifts for families and businesses (see box below).
It’s a much tighter limit than the EU’s current plans for a 55% cut in the same 30-year timeframe and if the union adopts something like it, that would mean a much lower volume of allowances available for the European carbon market. When supply drops, markets usually move only in one direction –up– even ones as notoriously fickle as this one.
The U.K. move is daring because it shows it’s not only comfortable that the technology is in place to achieve such a big drop, but it’s also confident the it can tweak its own markets to incentivize investors and manage the risks of complying with the goal.
It puts pressure on the EU because the union won’t want the U.K. to attract more than its fair share of cleantech investment after Brexit — investors are desperate for green opportunities.
Brexit negotiations are still ongoing, with the transition period set to end on Dec. 31.
“We encourage the Prime Minister to make a 2030 commitment that is as bold as possible, to inspire other world leaders to follow suit,” said the government’s advisers the Climate Change Committee.
“As such, the Government may choose to go beyond a 68% reduction. The CCC would support the use of international credits to do so. We would not expect credits to be used towards the 68% reduction,” the committee said.
That’s potentially even more ambitious and could provide carbon finance to emerging nations, who are less to blame for climate change.
It’s what Greta has been waiting for.
“There are so many people, companies and organisations who have honed skills over many years that are ready to help realise this low carbon, sustainable future,” said Nicola Steen, head of partnerships at Redshaw Advisors Ltd., an environmental markets risk-management company in London.
Over the decades, Steen has worked as a broker, organised events to build collaborative networks and even pushed to help train women to install efficient cookstoves in emerging countries — all to help the climate. “We can now put our shoulders to the wheel and help get this show on the road,” she said.
The proposed U.K. target for the Paris framework would allow comparable action from other developed countries “with developing countries following slightly later (i.e. where they generally adopt low-carbon measures later, achieve lower percentage reductions to 2030 and reach Net Zero emissions after 2050),” the committee said.
The following chart shows how the U.K. is considering a more ambitious pathway — considering its substantial historical contribution to global warming:
There wasn’t immediately much new information on how the international carbon trading might work.
Should the U.K. end up accepting a target for a 75% reduction by 2030, the extra 7 percentage points could be filled using Paris carbon credits.
Former Bank of England governor Mark Carney also called for boldness, seeking a ‘$100b a year’ global carbon offset market, according to the FT.
Demand for emission-reduction credits is expected to grow as more companies and countries try to reach emissions targets. The tighter the targets, the smaller the supply and the bigger the incentive to cut emissions — the higher the carbon price.
There’s still months of UN negotiations to decide how to manage such a system, which would likely come under the Paris climate deal or not gain traction, especially in emerging nations. Regulation of new markets needs to be much more robust than for current carbon markets, warn environmental lobby groups.
See this on the EU carbon market:
See this on Brexit:
See this showing how countries could be more ambitious:
(Updates with Carbon Pulse later on Thursday, then swapped in committee letter and additional chart from committee showing some climate justice, Boris Johnson early Friday, Steen comments later on Friday)