State and Trends of Carbon Pricing
Carbon markets are primed for growth. Countries are increasingly beginning to leverage cooperative approaches under Article 6 of the Paris Agreement to mobilize climate investments for their NDCs. Institutional frameworks and necessary market infrastructure are being put in place to support this ambition.
Similarly, voluntary carbon markets, driven largely by demand from corporations for their voluntary commitments, are concurrently serving as a bridge toward deeper decarbonization strategies and can increasingly be used as a vehicle to channel significant private investment to fund mitigation and development efforts. Carbon markets are, however, at an inflection point with several challenges looming large. Environmental integrity concerns, changing and uncertain government policies, and lack of clarity about how voluntary and Paris Agreement markets will converge all cast shadows on the potential of these markets to fulfill their transformative role.
