Carbon trading: the future

The international market in carbon offsets is expanding ahead of international regulation. Projects are emerging throughout the developing world that target deforestation and poverty and deliver verifiable carbon reductions. Companies and individuals are purchasing these offsets to develop carbon neutral products. Countries and major corporations are embracing these mechanisms as a means to provide market driven solutions to the challenge of climate change.

There is a wide variation in the estimates of demand, supply and price (marginal abatement costs) data for GHG credits. The variation derives from uncertainties in the projected growth in GHG, the level of domestic action required, and the rules for the compliance markets following the expiry of the Kyoto Protocol in 2013.

Future demand

Most of the OECD-Annex B countries are unlikely to meet their GHG emission reduction commitments, and studies estimate that the baseline scenario for these countries will exceed the commitments to emissions reductions by North America by 21% to 30%, Pacific OECD by 19% to 29% and Western Europe by 16% to 27%. This points to significant potential demand in the market for carbon offsets from the developing world.