US ELECTIONS: Carbon markets will weather changes in US climate policy, say experts

Global carbon markets will be able to weather any potential changes in US climate policy after Donald Trump's latest election victory, with Asia and Europe picking up the slack, experts said at the FT Commodities Asia Summit 2024 held over Nov. 6-7.

The outcome of the US elections has spurred concerns over whether the country will withdraw from the Paris Agreement and disrupt the development of international carbon markets and global climate initiatives, especially ahead of COP29 in the coming week.

The industry has seen political changes all the time, which will not stop, but what is important is the acknowledgment of how important Asia is for the carbon markets, either the voluntary market or the Article 6 market, said John Lo, founder of Asia Carbon Institute, a Singapore-based carbon registry focused on Asia-specific carbon credit methodologies.

"I think Asia or ASEAN, if they band together, is quite a significant supply and demand center," Lo said, adding that after having engaged with various different project host governments, he sees the wheels being set in motion already and that will continue to move regardless of the US election outcome.

The carbon markets will move ahead because countries need time to develop the framework and if the US or other countries are not part of it, there will be "differentiated blocks" that emerge; but when everybody is more mature they will eventually come together and form as one standard, he said.

"But it will happen," Lo added.

Singapore, Japan and Thailand have become pilot countries for Article 6.2 implementation, and ASEAN countries like Indonesia and Malaysia have abundant natural resources to develop nature-based VCM and Article 6 projects, experts highlighted at the conference.

They said that currently the global climate agenda is being driven by European and Asian countries, especially cross-border carbon policies and the UN-backed Article 6 market. Meanwhile, a more mature voluntary carbon market has enabled the US private sector to meet climate commitments despite political changes, so any US-related disruption may not be as significant as expected.

Too early to tell

"I think some of the [US] states probably might still continue with their Article 6 kind of commitments. We know California has its own emission trading system. I doubt that even if you have a Trump 2.0 administration that's going to change," said Ivan Tan, director of Enterprise Singapore, a government agency supporting local enterprises.

"So that's one part that we should acknowledge. The various US states may still be able to pursue their climate agenda," he said.

"The US is an important player in the global climate change discussion. But even if the US is not [part of the discussion], I suspect that the climate change imperative will still be there. The other countries will probably still carry on," he said, pointing out some global taxation rules where other countries are proceeding without the US.

"I think it is important for the US to be in. But even if they are not, I'm pretty confident that the other countries will go ahead with what they are doing, especially in Europe," he said.

California's cap-and-trade carbon market has been linked with the cap-and-trade system of Québec, Canada since 2014, with mutual recognition and acceptance of compliance instruments. It is an example of how cross-border emission trading can happen in the US under a state-level program.

"Of course the US plays a very significant role in all international climate negotiations, whether it relates to their NDC, climate finance, Article 6 markets," said Björn Fondén, International Policy Advisor with IETA, formerly known as the International Emissions Trading Association.

He said around mid-2024, the US issued guidelines for supporting the voluntary carbon markets.

"This could be seen as political support behind voluntary action in a case where a compliance or Article 6-driven market would not happen under a new administration," Fondén added.