Thesis: Carbon market will grow multiples in 2020's due to increasing regulator targets

# Thesis: Carbon market will grow multiples in 2020's due to increasing regulator targets ## Questions * How are we tracking this? * Price of Carbon, Volume of Carbon * [Daily carbon prices](https://ember-climate.org/data/carbon-price-viewer/) * [IHS Markit Global Carbon Index (USD)](https://indices.ihsmarkit.com/#/Carbonindex) * Pandemic Risks (maybe include other drivers later) * Changes the focus off climate change, easier to ignore * Physical carbon credits lower demand (didn't see that in 2020) * Investment options * https://finance.yahoo.com/quote/NETZ.NE/ Canadian public company buying up land to sell carbon credits * How do these markets work? * [Voluntary carbon markets pricing and participants](https://www.spglobal.com/platts/en/market-insights/blogs/energy-transition/061021-voluntary-carbon-markets-pricing-participants-trading-corsia-credits) * Intersection with crypto * The bull case is a progression to currencies without all the negative externalities, US Petro dollar (caused a lot of polution etc) -> BTC (backed by proof of work, caused a less pollution but still bad) -> Green money backed by verified ecological outcomes ## References * [Carbon market grows 20% to 272 billion in 2020](https://www.spglobal.com/platts/en/market-insights/latest-news/coal/012721-global-carbon-market-grows-20-to-272-billion-in-2020-refinitiv) * [Carbon market estimated size of 2.4 trillion by 2027](https://www.globenewswire.com/news-release/2021/07/01/2256485/0/en/Global-Carbon-Credit-Market-is-estimated-to-account-for-US-2-407-8-Mn-by-end-of-2027-owing-to-increasing-global-warming-impact-Says-Coherent-Market-Insights-CMI.html) * [EU proposes worlds first carbon border tarrif](https://slashdot.org/story/21/07/14/2146214/eu-proposes-worlds-first-carbon-border-tax) The above suggests a 10x in 7 years the size of the market. * [Why the price of carbon credits is going to the moon](https://www.afr.com/politics/why-the-price-of-carbon-credits-is-going-to-the-moon-20211101-p594ww) Mr Stuart agreed that supply of carbon credits “is definitely tightening up” as companies hoover up credits to meet their decarbonisation promises. “It was not so long ago that we’d talk to talk companies, and they’d ask us what an offset is.” “It’s been helped by things like COP and Glasgow, but it’s actually driven by financial markets, by banks, lenders and financiers looking for more favourable rates, and being able to display ESG credentials,” Mr Stuart said. “That’s driving the market more than regulation.” “We think the price appreciation is only just getting started,” he said. “The reason for that is because we think the market is acutely and chronically undersupplied in carbon credits for the number of commitments being made by companies and countries”. ## Risks Is this best done on the blockchain? Runs into the same problem as other real world use cases, the Sybil problem. For this to work on the blockchain you need to solve the Sybil attack problem * If you create a million identities on the blockchain can you game the system? * Regen builds up trust through on chain data - ## What will make the carbon credit market grow? You need to believe in one or more of the following: 1. Glasgow 2030 and 2050 pledges by countries and companies to decarbonise will turn into real action that creates demand for offsets 2. As more investment money flows into the asset class it's hitting a market that still doesn't have scaled or liquid derivatives alternatives to buying the physical carbon credits 3. Potential demand created by Klima DAO Benchmark price for carbon credits - CBL GEO ## Why not just reduce carbon emissions rather than buy credits? * Technology cannot change overnight, it takes time to develop and scale technology to a cost to be competative and a scale to be able to be rolled out to the world. Credits are counteract emmissions during this period * Carbon takes 100s of years to come out of the atmosphere, after the world gets to zero there is already baked in climate change. Credits can be used afterwards to pull carbon out of the atmosphere to reduce these changes. * Future non-carbon credits could also be used to protect different environmental causes, this could continue the voluntary ESG market after the world gets to zero. Companies will always like to be good for the environment for marketing/moral reasons.