Carbon finance is at the core of climate goals

Without fast and deep emission reductions in all sectors, limiting global warming to 1.5 degrees Celsius is not achievable. Effective action requires concerted and sufficient investment, knowing that the costs of inaction will be far higher. The good news is we have all the tools and the knowledge required to limit warming. However, we need to speed up. This also means that market instruments must be expanded and applied more broadly and equitably to support immediate emissions reduction and encourage innovation.

Nationally determined contributions are at the core of the Paris agreement and key to the achievement of its long-term goals. According to the Intergovernmental Panel on Climate Change, developing countries alone require up to $6tn by 2030 to finance not even half of their climate action goals. While financial flows are three to six times lower than levels needed by 2030 to limit warming to below 2 degrees Celsius, there is sufficient global capital and liquidity to close investment gaps.

Many countries are looking to carbon markets as part of the answer. Issuing green bonds is another solution for financing climate change mitigation and adaptation. So far, Europe has been the first (and the only) continent to promote the use of carbon markets to reduce emissions and of the green bond segment to finance the transition to low-carbon economies.

During COP27, Mike Bloomberg, founder and CEO of Bloomberg, said ‘Carbon markets were perceived like the wild west in the…