Some points to consider before trading carbon this week (1)

By Mathew Carr

Nov. 20-21, 2022: Sharm, Egypt — COP27, the UN climate talks that wound up two days late on Sunday in Egypt, on the surface did little to boost ambition vs the climate talks held in Glasgow, a year ago.

But, when you think about it clearly, the outcome was fairly “non compromising.”

[One thing before I start: none of this is investment advice. I’m not regulated by anyone to give investment advice. Check things out with professional advisors before relying on any idea here, if you can find one who knows something about it.]

What the good envoys in the desert did was not water down the COP26 text much (as far as I can tell, immediately). They had no water …getit? (Respectful / cheeky joke.)

They said this (see here)

The draft

59. Notes that global climate finance flows are small relative to the overall needs of developing countries, with such flows in 2019–2020 estimated to be USD 803 billion, which is 31–32 per cent of the annual investment needed to keep the global temperature rise well below 2 °C or at 1.5 °C, and also below what would be expected in the light of the investment opportunities identified and the cost of failure to meet climate-stabilization targets; 

And this:

The draft

20. Notes with serious concern the finding in the latest synthesis report on nationally determined contributions that the total global greenhouse gas emission level in 2030, taking into account implementation of all latest nationally determined contributions, is estimated to be 0.3 per cent below the 2019 level, which is not in line with least-cost scenarios for keeping global temperature rise to 2 or 1.5 °C; 

Importantly, they said this:

The draft

15. Recognizes that limiting global warming to 1.5 °C requires rapid, deep and sustained reductions in global greenhouse gas emissions of 43 per cent by 2030 relative to the 2019 level; 

This is not a change, you might say.

But it sort of is a change.

What’s different about right now is that, in the past war-torn year, the world has spewed another 50 billion tons of co2 equivalent of heat-trapping gas into the atmosphere. That’s near the record, or it may be a new record.

(One contact from Norway reckons GHG output won’t be a record, despite a little more coal burning.)

But the key point is, the 43 per cent reduction target for 2030 is a whole lot more difficult (steeper) to achieve from a near-record level in 2022 than a record level (or near record) in 2019.

The Wall Street Journal in its lead here, said this: Poorer countries secured a deal at United Nations climate talks to create a fund for climate-related damage as part of a broader agreement that failed to yield faster cuts in emissions sought by wealthy nations to avert more severe global warming.

….That newspaper seems to be implying emerging countries should have done more to achieve “their” loss and damage fund, but the reverse is true.

The rich countries should have boosted their cuts — AND paid up for the damage and the losses being wreaked on the poor. Rich people created the climate crisis and are refusing to clean up their own mess.

The WSJ appears to be victim blaming.

Before that emergency-fund deal at COP27, weak as it is, “Loss and damage was lost and damaged,” one envoy from a badly hurt emerging nation was overheard saying.

Bottom line

My survey of several policy, economics and carbon experts, interviewed as or after the conference wound up, found there may not be much impact on markets immediately.

Carbon credits and allowances probably won’t surge straight away. Oil, coal and natural gas futures probably won’t plunge.

At some point soon, though, the commodity buyers and sellers will probably realise there is a massive shortage of emission reductions (and one of the best ways to measure emission reductions is to turn them into high-quality emission credits).

Don’t listen to the shameful comedian John Oliver, who unfairly criticised carbon credits in a frankly ignorant, dangerous and sinister way, back in August. Read this, instead. Oliver won’t have the last laugh, this time.

Also, just think about this global situation in a wider way, as I already kind of alluded to, above.


[Warning: demand may never take off for some flawed credits, but there are seriously few of them.]

An unfairly demonized carbon credit is very different from a dodgy one.

Buy as many unfairly demonized carbon credits as you can, is one of my key messages, if you can afford the odd loss. (Rational thinking does not always prevail, in life.)

There is no good reason why the carbon markets need to have 1,000 times better standards that the rigged, corrupt crude oil market and 500 times better standards than other markets around the world.

Most markets are rigged to some extent, because not everyone has the same info, which in theory they should.

Bad products are bought and sold every day.

Buyer beware.

The carbon markets have improved massively in the past year, so, yes, maybe hold off a little longer if you are thinking of selling, while the dust settles.

You might get a higher price, assuming you can wait, and assuming your credits aren’t sour milk — “wait, let’s dress them up as yoghurt, not.”

Some rainforest nations have been waiting 30 years, busily processing rich people’s heat-trapping emissions, for nothing.

There is a risk the carbon markets will for some time more …seem a little like the market for Sharm el Sheikh taxis –oversupplied and you are not entirely sure what sort of ride you are getting.

Source: CarrZee – I’m not implying any of these particular guys / taxis are sharks

But the oversupply in carbon’s case is a mirage.

If you are buying carbon, don’t exploit the seller, even if he or she is a little more ignorant than you. Teach. Do the right thing or at least try. It’s difficult for some people. Not everything should be about a fast buck.

Read these documents, below, too (as well as the main doc linked in the CarrZee story above).

There’s probably something that WILL move markets in these docs, if not on Monday, soon, or in a year…especially in relation to Kyoto credits. Think “patient capital”.

(These commodity markets have futures contracts, or at least forwards, by the way, if you have a good broker.)

Please do tip me off when you see something that’s market moving at

Article 6.2 text …maybe read this one first:

Guidance to Green Climate Fund:

Article 6.4 rules:

Article 6.4 guidance:

Urgently scaling up mitigation ambition:

New collective quantified goal on climate finance:

And if that is not enough, or if you are a country policy wonk, then this, maybe:

Article 6.8:

Happy reading.

(More to come)

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