Demand in a Fragmented Global Carbon Market: Outlook and Policy Options

image of Demand in a Fragmented Global Carbon Market: Outlook and Policy Options

The global carbon market currently faces a deep demand crisis. The consequent price fall reduces the incentive to make low-carbon investments and thus increases the risk of locking in carbon-intensive infrastructure. The global carbon market relies on ambitious climate policy and consists of a mosaic of different schemes. Despite the current lack of ambitious global climate policy, various market-based approaches are emerging around the world, indicating increasing scope and fragmentation of the carbon markets. This report, conducted by GreenStream together with Climate Focus, analyses the status and outlook of global carbon markets and identifies measures and circumstances how new demand for carbon credits could be created to strengthen global efforts to limit the global average temperature rise to 2°C, taking into account the trend towards fragmentation of carbon markets.



Negotiation positions towards Doha

In the UN negotiations, Parties have taken various positions on the use of market mechanisms to create incentives for investments and/or international cooperation in mitigation action. Some Parties also specifically refer to the oversupply in the market and how this depresses the price of carbon credits. Also, the positions taken by developing countries show more diversity and variation than those of developed countries, reflecting differing national interests. This section provides an overview of the different positions in the run-up to Doha, and finishes with an update on Doha’s outcomes relevant to this report.


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