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    Carbon Markets

    Carbon markets are an important step on the journey to deliver on global net zero commitments.

    S&P Global brings transparency to nascent carbon markets with offerings covering market infrastructure, price assessments for indexation and benchmarking, as well as analytics data and insight.

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    What are Carbon Markets?

    Carbon markets help to facilitate progress on global net zero commitments by enabling market participants to trade carbon allowances and carbon offsets via compliance and voluntary carbon markets. Carbon markets are expected to grow rapidly in the short term creating market opportunities and mobilizing investment, and diminish in the longer term as countries close in on net zero emissions.




    • What are Carbon Allowances?

      Carbon Allowances are used in compliance carbon markets where government organizations or regulatory authorities provide regulated companies a certain number of carbon allowances every year, allowing them to emit one tonne of CO2 per credit. Market participants, often including both emitters and financial intermediaries, can trade allowances to meet regulatory requirements (or for hedging or trading purposes). In the case of cap-and-trade programs, called Emissions Trading Systems (ETS), the limit on carbon emissions (i.e., the cap) slowly decreases over time.

    • What are Carbon Offsets?

      Carbon Offsets, traditionally used in voluntary carbon markets, enable companies (and individuals) to offset their carbon emissions by buying offsets that either reduce emissions (e.g. renewable energy) or remove emissions (e.g. reforestation). Carbon offsets have also been used in compliance carbon markets to satisfy a portion of cap-and-trade requirements.

    "Putting a price on CO2 is the surest way to drive the energy transition, with a growing number of countries adopting emissions trading systems, carbon taxes or a combination of both."

    S&P Global Commodity Insights

    Atlas of Energy Transition

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    Benefits of Carbon Markets

    Carbon markets play a crucial role in reducing greenhouse gas emissions by providing a mechanism for companies to offset their carbon footprint. By purchasing carbon credits, businesses can invest in projects that reduce or remove greenhouse gas emissions, such as renewable energy projects or reforestation initiatives. This promotes the development and adoption of clean technologies and sustainable practices, leading to a more environmentally friendly economy. Additionally, participating in carbon markets can provide financial incentives and opportunities for businesses. Companies can generate revenue by selling excess carbon credits or by developing innovative solutions to reduce emissions. This not only helps businesses meet their environmental goals but also contributes to their bottom line. Overall, carbon markets create a win-win situation by addressing climate change, promoting sustainability, and offering financial benefits to businesses.

     

    Compliance vs voluntary carbon markets: What's the difference?

    The compliance carbon market refers to a market where companies are required to meet specific emission reduction targets set by regulatory authorities. These targets are often legally binding, and companies must purchase carbon credits to offset their emissions and comply with regulations. On the other hand, the voluntary carbon market is driven by organizations and individuals who voluntarily choose to offset their emissions by purchasing carbon credits. These credits are not mandated by regulations but are used to demonstrate environmental responsibility and sustainability. Both markets involve the buying and selling of carbon credits, but the key difference lies in the regulatory requirements and obligations.

    Get ready for significant growth in carbon markets

    While nascent today, carbon markets are projected to grow significantly providing important pathways for countries, corporates, and financial institutions to turn net zero commitments into net zero action plans.

    Find out how we are bringing transparency to the nascent carbon markets with infrastructure, price assessments, index benchmarks, and data and insight.

    • INFRASTRUCTURE
    • PRICE ASSESSMENTS
    • INDICES
    • DATA AND INSIGHTS
    SEE ALL SOLUTIONS

    Discover integrated infrastructure solutions for carbon market

    Environmental Registry

    Manage carbon, water and biodiversity credits in a centralized, financial markets-based registry system, helping to increase transparency, efficiency and scalability.

    Discover Environmental Registry

    Meta Registry®

    Seamlessly connect disparate markets and registry systems around the world, enabling the exchange of carbon market data and mitigating the risk of double-counting credits.

    Discover Meta-Registry

    AUCTIONS PLATFORM

    Set prices for carbon allowances or credits via transparent market mechanisms with secure auctions technology including auction setup, participant application, bidding, price calculation, results generation, approvals and result distribution, as well as interfaces to third parties.

    Discover Auctions Platform

    Our carbon market price assessments offer essential price transparency

    Carbon Allowance Price Assessments

    Mandatory carbon market price assessments include evaluations of over-the-counter forward prices for December European Union Allowances (EUAs) and United Kingdom Allowances (UKAs), which are financial instruments used in these two carbon trading schemes.

    Low Carbon Fuel Standard (LCFS)

    These daily assessments evaluate carbon credits being purchased by producers of petroleum and diesel from producers of ethanol, bio diesel, hydrogen and electric charging to meet their deficit shortcomings. 

    California Offsets and ALLOWANCES

    These look at physically delivered greenhouse gas emissions offset credits that are limited to emissions-reduction projects in the U.S. and specifically to five areas: forestry, urban forestry, destruction of ozone-depleting substances and mine methane capture.

    Regional Greenhouse Gas Initiative (RGGI)

    These look at the cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia to cap and reduce CO2 emissions from the power sector.

    Voluntary Carbon Market  

    These assessments cover a full range of projects that reflect bids, offers and trades as reported in either the Commodity Insights Market on Close assessment process, the brokered market or on trading and exchange instruments. The assessments reflect the individual attributes of particular projects and are segmented into avoidance and removal credits. Additional assessments are available for the International Civil Aviation Organization’s CORSIA program, plus the most competitive methane collection carbon credits.

    Carbon Credit Settlements and Assessments

    S&P Global Commodity Insight’s partnership with the Xpansiv spot-market exchange provides assessments of the daily and monthly settlement prices for Xpansiv’s carbon credit contracts, as well as the settlement prices for physically-delivered futures contracts.

    Our carbon market indices are designed to inform price discovery and increase liquidity

    THE GLOBAL CARBON INDEX

    HIS Markit, now part of S&P Global, together with Climate Finance Partners (CLIFI), launched this first-of-its-kind index that tracks the most liquid segment of the tradable carbon credit futures markets. Constituents of the index include futures contracts on European Union Allowances (EUA), UK Allowances (UKA), California Carbon Allowances (CCA) and the Regional Greenhouse Gas Initiative (RGGI), with pricing data from OPIS by HIS Markit Pricing (North American Pricing) and ICE Futures Pricing (European Pricing). The Global Carbon Index rules-based methodology is publicly disclosed and designed to be replicable.

    Explore Carbon Credit Index

    The S&P GSCI Global Voluntary Carbon Liquidity Weighted

    The S&P GSCI Global Voluntary Carbon Liquidity Weighted is designed to reflect the performance of the global voluntary carbon credit market. Index constituents are liquidity-weighted tradeable voluntary carbon credit futures contracts.

    Explore S&P GSCI Global Voluntary Carbon Liquidity Weighted

    The S&P GSCI Carbon Emission Allowances

    The S&P GSCI Carbon Emission Allowances (EUA) is designed to measure the performance of the European Union Carbon Emission Allowances (EUA) market.

    Explore EUA Index

    Our data and insights uncover the details behind the carbon market trends

    ESG Insights

    Get the latest news coming out of global mandatory and voluntary carbon markets, including specific details on the short-, medium- and long-term outlooks for the mandatory carbon markets in each region.

    Check out more ESG insights

    Navigate the Energy Transition with S&P Global Commodity Insights

    Learn more about the complete view of global energy and commodities markets from S&P Global Commodity Insights by accessing reports, case studies, and other featured insights to help you navigate the energy transition. Sign up for our Energy Transition newsletter.

    Check out more from Commodity Insights

    S&P Global Trucost Carbon Earnings at Risk Dataset

    Quantify company-level exposure to current and future carbon pricing scenarios.

    Find Out More on S&P Global Marketplace

    S&P Global 1200
    12.74%
    $283.19B
    Materials
    40.07%
    $71.48B
    Utilities
    74.89%
    $92.74B
    Energy
    34.32%
    $54.77B
    Industrials
    8.87%
    $26.89B
    Consumer Discretionary
    3.12%
    $9.11B
    Consumer Staples
    5.14%
    $9.27B
    Financials
    5.77%
    $7.58B
    Real Estate
    1.96%
    $1B
    Information Technology
    1.68%
    $4.46B
    Communication Services
    1.04%
    $3.7B
    Health Care
    1.36%
    $2.16B
    Source: S&P Global Trucost. Data as at November 2020. For illustrative purposes. Data showcase is based on a high impact climate change scenario for companies listed on the S&P Global 1200 index, selected to represent a global supply chain, equity portfolio or loan book. The index covers 31 countries and approximately 70 percent of global stock market capitalization.

    Challenges and Future of Carbon Markets

    The challenges faced by carbon markets include ensuring transparency and integrity in the trading of carbon credits. It is important to establish robust monitoring, reporting, and verification mechanisms to prevent fraud and ensure that emission reductions are accurately measured and accounted for. Another challenge is addressing market fluctuations and price volatility, as carbon credits can be subject to changing market conditions and investor sentiment. To overcome these challenges, there is a need for standardized regulations and frameworks that provide stability and confidence in the market. Looking towards the future, carbon markets have the potential for significant growth. As more countries and companies commit to reducing their carbon emissions, the demand for carbon credits is expected to increase. Additionally, emerging trends such as the expansion of carbon pricing mechanisms and the integration of carbon markets with other sustainability initiatives can further drive the growth and effectiveness of carbon markets.

    Carbon market case studies

    • A Large Manufacturing Company Looks to Carbon Offsets to Meet its Net Zero Goals

      FIND OUT NET ZERO MANUFACTURING

    • A Bank Relies on Extensive Energy Data to Guide its Path to Net Zero

      Case Study

    • A REIT Digs Deep on Physical Climate Risks in its Portfolio

      Case Study

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    Carbon Markets FAQs

    1. What are carbon credits?
      Carbon credits are tradable permits representing the right to emit a certain amount of carbon dioxide or other greenhouse gases. Issued to companies or countries that reduce emissions, they can be bought by those exceeding their limits. Carbon credits promote environmental sustainability by creating a market for emissions reduction and mitigation efforts.
    2. What is voluntary carbon market?
      Voluntary carbon market allows individuals, companies, and organizations to voluntarily purchase and trade carbon credits to offset their own emissions. Unlike compliance mandatory carbon markets, participation is optional, and buyers engage for self-imposed sustainability goals. Voluntary carbon market fosters private-sector initiatives to address climate change by encouraging emission reductions and supporting environmental projects
    3. How does the carbon trading market work?
      In carbon trading, companies or countries receive a limited set of carbon credits, each representing a specific amount of emissions. Those exceeding their limits can buy credits from those with surplus. This creates a market where emission reduction efforts are financially rewarded, encouraging sustainable practices and fostering a global approach to climate change.




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