Actors across the public and private sector are identifying opportunities to leverage market mechanisms to mobilize resources and reduce the cost of the transition to a net zero emissions economy. One of the fastest growing mechanisms in recent years is the development of public carbon markets. Carbon markets are marketplaces or facilities where emission allowances, credits and derived financial instruments are bought and sold. Carbon markets have the effect of putting a price on carbon that can incentivize emissions reduction, and (in some types of carbon markets) channel investment capital towards climate mitigation efforts.

In addition to increasing activity across the private sector, more than two thirds of countries intend to use carbon markets to meet their NDCs, and a number of countries are investing in state-of-the-art digital infrastructure to enable participation in international carbon markets. It is estimated that trading in carbon credits could reduce the cost of implementing NDCs by more than half. In many markets, capital market actors such as stock or derivatives exchanges are expected by policymakers to play a prominent role in establishing carbon trading facilities.

This session provides an overview of different types of carbon markets and discusses the role exchanges and securities market regulators can play in making carbon markets work most effectively in combatting climate change, in partnership with IOSCO.

Session themes:

• What is the typical structure of the carbon market value chain?
• Who are the key players and steps in the process of trading carbon credits and allowances?
• What are the main opportunities and challenges for making carbon markets effective?
• What are the differences and complementarities between compliance carbon markets and voluntary carbon markets?
• How can exchanges and securities market regulators become involved in carbon markets or optimize ongoing involvement?