How Can Carbon Markets Limit Climate Change?

Carbon markets are advancing on a global level, following the first country-to-country trades at COP27. The Energy Podcast investigates how carbon pricing works and examines what role it can play in the race to reduce greenhouse gas emissions. Presented by Julia Streets. Featuring Dr Hasan Muslemani from the Oxford Institute of Energy Studies, Andrea Bonzanni from the International Emissions Trading Association and Shell’s senior carbon pricing policy advisor, Dr Malek Al-Chalabi. With additional contribution by Stephen Kansuk, Head of Environment and Climate Change at the United Nations in Ghana. The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and Sarah Moore, and edited by Molly Lynch and Sophie Curtis.

EPISODE TRANSCRIPT: 00:00 Julia Streets: Today on The Energy Podcast... MUSIC BED COMES IN Andrea Bonzanni: Emissions must be reduced globally irrespective of where they take place. The atmosphere is one at the end of the day. Article VI allows reducing emissions where it’s more efficient. Dr Hasan Muslemani: We have solutions that are being praised as the holy grail of net- zero… The issue is that we need all the solutions that we can get because in the fight against climate change, we are really in a race against time. Julia Streets: The cost of climate change. It's a phrase commonly used by governments, companies, and campaigners across the world when discussing the need to limit global warming to well below two degrees Celsius. Quantifying the exact cost of far- reaching effects of climate change is not an easy task. But putting a price on emissions is viewed by many as an effective means to help drive down levels of CO2 in the atmosphere. The idea is simple. Putting a price on carbon emissions creates a financial incentive to reduce them. Carbon markets have existed for decades. There are many carbon pricing systems around the world, but at present, it is estimated that only a quarter of emissions are priced. That could soon change. At last year's COP27 climate conference in Egypt, the first country- to- country carbon trades took place. Could this pave the way for further uptake of carbon trading and what impact could that have in the fight against global warming? Hello, I'm Julia Streets, and today on The Energy Podcast: How can carbon markets limit climate change? MUSIC ENDS With me to discuss this are Andrea Bonzanni, who's the international policy director at the International Emissions Trading Association, who you may well remember from a previous episode of The Energy Podcast. He is joined by Dr. Hasan Muslemani, who is the head of Carbon Management Research at the Oxford Institute for Energy Studies. And our third guest is Dr. Malek Al- Chalabi, who is a senior carbon pricing policy advisor at Shell. Hasan, perhaps I could start with you. For the benefit of the audience, would you just mind explaining what we mean when we talk about carbon markets? 02:18 Dr. Hasan Muslemani: The fundamental concept behind a carbon market is really to put a price on carbon, or in other words, to quantify the cost of damages that emissions will cost our society over time. To do this, we have, at the heart of carbon markets, what is called carbon accounting or greenhouse gas accounting. This represents a set of standards and methods that help us quantify but also verify the impact that each business creates on the environment, and this impact is reported in terms of tons of CO2 emitted. Now, something that I really want to emphasize here is that today, we speak of carbon markets, but we need to differentiate between two different types of markets. The first is what we call a compliance market, which is a market that is heavily regulated and corresponds to a specific region or jurisdiction, and where companies within that jurisdiction have to take part in the market. The other one is a voluntary one. This is a lot less regulated and where participation is voluntary, as the name implies. T