Bloomberg Businessweek ICYMI: The Intersection of Climate Science and Capital Markets
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May 7, 2025 Olivia Albrecht shares insights on the rapidly expanding carbon market, projected to reach $1 trillion. She highlights the need for credible demand signals, distinguishing between compliance and voluntary markets. The discussion also covers sustainable finance complexities in the U.S., including a proposed carbon border adjustment by the Treasury. Financial firms are adapting by pivoting towards infrastructure and project finance to align with shifting climate policies. A lively exploration that connects climate and capital!
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Carbon Markets' Growing Role
- Carbon markets are a major intersection of climate and capital markets with nearly a trillion dollars in value today.
- Voluntary carbon markets are currently small, highlighting the need for more regulated compliance markets to drive demand.
Demand Drives Carbon Market Success
- Clear demand signals in compliance markets drive carbon asset value, unlike the voluntary market where demand is weak.
- More regulation and compliance activity are needed to strengthen voluntary carbon markets and investment incentives.
U.S. Carbon Border Adjustment Talk
- U.S. policy is evolving with talks on a carbon border adjustment to protect companies and incentivize domestic carbon reduction.
- This could create a competitive and regulatory alignment with European carbon taxes, impacting trade.