Fighting climate change: understand how carbon markets work

Much is said about the climate changes, your consequences and ways to mitigate them. One of the ways to combat these effects is carbon markets. Want to know more about this mechanism? Check out the text below!

THE decarbonization is the search for the reduction (and possible elimination) of carbon emissions into the atmosphere, especially from carbon dioxide (CO2), responsible for around 60% of the Greenhouse Effect. It happens when there is replacement of polluting matrices, such as the burning of fossil fuels, more efficient technologies and renewable energies, which come from natural resources such as sun and wind.

When we talk about decarbonization, we immediately think about carbon markets. They are one of the financial solutions that can be used to facilitate the achievement of climate goals aimed at 2030. These goals were defined in the Paris Agreement during COP 21, to prevent an increase above 1.5°C in the global average temperature. Each signatory country established its goals for reducing greenhouse gas (GHG) emissions, called Nationally Determined Contribution (NDC).

A 2023 McKinsey study indicated that Brazil, for example, can reduce emissions of these gases in several sectors and at low costs, reducing illegal deforestation, increasing the use of renewable energy sources and adopting sustainable techniques in animal and animal management. in the farming.

These emissions reductions generate carbon credits. In other words, a carbon credit is generated for each ton of carbon that is no longer emitted or captured from the atmosphere. To achieve this, an activity that would generate greenhouse gas emissions must be replaced by one that reduces these emissions.

In short, the carbon market is characterized by the sale of these credits between those who hold them, because they have reduced their emissions, and those who need to reduce them, but have not reached their targets.

In each country the market is regulated by legislation. In Brazil, regulation is made by Decree No. 5,882, of 2006. And, like any other currency, the value of carbon credits varies, and can be influenced by issues economic, marketing and environmental.

There is also a difference between the markets for selling carbon credits. There are two:

  • Regulated market: it is a mandatory market, established by cap-and-trade regulations (which limit gas emissions through pricing) through commitments made between countries. In them, companies have a stipulated maximum emissions limit and, based on that, they can buy and sell permits.
  • Voluntary market: it is an optional market, in which companies and people buy credits on their own to offset emissions.

Now that you know how carbon markets work, how about finding out Sitawi's role in this mechanism? Access our publication and understand how we can translate these opportunities into positive impact for people and nature!

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