All countries are aiming to achieve the Paris Agreement target of reducing global warming

The only accepted emission offset will be REMOVALS either nature based or captured

Projected global carbon dioxide emissions per scenario

Gt CO2 per year

Source: Global Carbon Budget 2019, Global Energy Perspective – Reference Case 2019, McKinsey 1.5C Scenario Analysis; IEA WEO 2019, expanded by Woods Hole Research Center

Implications

The Paris Agreement aims to limit global warming to 1.5°C vs. preindustrial levels

The world has to emit net-zero CO2 by 2050 to achieve the global warming target from 50bn currently

Governments are expected to discuss their ambition level at COP28; UAE has already announced its net Zero target

In addition, the role of the private sector is becoming increasingly important to help reach “net-zero” by 2050 from a “cascading” standpoint

Regulators across the world are implementing policies to incentivize and accelerate decarbonization

Emission Trading Scheme (ETS) is a cap-and-trade system wherein ‘maximum cap’ is applied on emissions and emitters can then ‘trade’ their certificates i.e., buy if they emit more than cap or sell if they emit less than cap. CO2 tax, on the other hand, is a fixed tax on emissions
CBAM (Carbon Border Adjustment Mechanism) is a proposed carbon tax on carbon intensive products entering the EU

Source: ICAP, World Bank, Press Search

Globally, there are currently 64 carbon pricing initiatives implemented or scheduled, covering 22% of global GHG emissions

EU’s CBAM will influence climate policy beyond its borders by affecting re-routing of trade of low carbon products

Carbon taxes should be ~300 USD/tonne CO2 by 2050 to force adherence to the Paris agreement, as per IEA

Art. 6 of the Paris Agreement is key to the next step in
the process (demand augmentation)

A formal agreement between government is required to recognize emissions from another country and avoid double-counting

The importance of Art. 6 in the Paris Agreement

Voluntary credits and registries have to agree to corresponding adjustments in the countries’ GHG inventories

Article 6 of the Paris Agreement

allows companies to achieve their mitigation goals in several ways:

Compliance instruments such as carbon taxes or industry-wide emission trading schemes
A new crediting mechanism akin to the UN Clean Development Mechanism (unlikely)
Framework for exchanging voluntary carbon credits among each other (incl. iRECs)

Green Economy Pre-feasibility study