Why carbon and energy markets need to be longer dated

By Mathew Carr

Carbon and energy futures markets that extend out to 2050 and beyond will make the climate transition smoother.

As Marcus Ferdinand from Greenfact says here, longer-dated markets will incentivise co2 removals from the atmosphere.

These removals will create removal credits that can be used to “mop up” residual emissions because the EUETS companies face achieving net zero by 2040.

Some companies need a way to deal with emissions they can’t cut all the way to zero.

Having a working futures market that extends out to 2050 and beyond would negate the need for a politically controversial carbon reserve bank, I reckon.

Ferdinand appears to agree.

The problem is energy and carbon markets only have liquidity about 5 years out, currently.

Lawmakers are not good at setting rules decades in advance. They need to lift their game on this and it’s possible because the climate crisis has a scientific and mathematical basis — the global carbon budget.

Can the world agree what the global carbon budget is? I’m not yet sure that it can.

This year’s global stocktake at the UNFCCC is a chance to do so.


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