Carbon Markets
Explore our carbon market solutions covering market infrastructure, price assessments for indexation and benchmarking and analytics data and insight.
Understanding Carbon Market Solutions
Carbon market solutions are mechanisms designed to reduce greenhouse gas emissions by creating economic incentives for companies and countries to lower their carbon footprint.
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.
Key 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. Below are the key benefits of our carbon market solutions:
Comprehensive Market Data and Insights: Gain access to detailed carbon scenarios and risk market data that is pivotal for companies looking to understand the dynamics of carbon markets and make informed decisions.
Support for Strategic Decision-Making: Our Carbon Markets solutions offer tools and resources that support strategic decision-making in carbon markets. These tools help companies navigate the complexities of carbon trading, providing scenario analysis to assess potential risks and opportunities.
Facilitation of Compliance and Voluntary Market Participation: Our Carbon Markets solutions are tailored for both compliance and voluntary carbon markets, providing assistance in meeting regulatory requirements and achieving sustainability goals. This dual focus allows companies to participate in carbon markets regardless of their regulatory obligations, offering flexibility and scalability.
Innovation and Technology Integration: Access cutting-edge technologies that support carbon capture, utilization, and storage (CCUS) initiatives, which are critical for achieving net-zero targets. Our Carbon Markets solutions are future-proof, with the integration of digital technologies, which play a significant role in enhancing market transparency and efficiency.
Promotion of Sustainable Practices: Our Carbon Markets solution promotes sustainable practices by encouraging investment in low-carbon technologies and practices. The solutions contribute to biodiversity and ecosystem services, which are increasingly recognized as important components of carbon markets
Global Reach and Expertise: With an extensive network and expertise in global markets, our Carbon Markets solutions is well-positioned to provide localized solutions with a global perspective. This global reach ensures that companies have access to the best practices and insights from around the world, enabling them to navigate the complexities of carbon markets effectively.
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.
Carbon Market Solutions FAQs
Our Approach
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Infrastructure
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.
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.
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Price Assessments
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 Energy 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.
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Indices
Our carbon market indices are designed to inform price discovery and increase liquidity
The Global Carbon Index
IHS 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 IHS 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.
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.
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.
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Data and Insights
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.
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S&P Global Trucost Carbon Earnings at Risk Dataset
Quantify company-level exposure to current and future carbon pricing scenarios.
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
Explore our case study collection to learn how our clients have tackled their most pressing ESG issues using S&P Global's essential intelligence data sets.
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