The following content is sponsored by ICE.

How Environmental Markets Advance Net Zero

In 2021, roughly 20% of global carbon emissions were covered by carbon pricing mechanisms.

Meanwhile, the global price of carbon increased 91%, bolstered by government, corporate, and investor demand. This puts traditional fuel sources at a disadvantage, instead building the investment case for renewables.

This infographic from ICE, the first in a three part series on the ESG toolkit, explores how environmental markets work and their role in the fight against climate change.

What are Environmental Markets?

First, meeting a goal of net zero carbon emissions involves limiting the use of the world’s finite carbon budget to meet a 1.5°C pathway.

Achieving net zero requires us to:

• Change how we utilize energy and transition to less carbon-intensive fuels
• Put a value on the conservation of nature or “natural capital” and carbon sinks, which accumulate and store carbon

Environmental markets facilitate the pathway to net zero by valuing externalities, such as placing a cost on pollution and placing a price on carbon storage. This helps balance the carbon cycle to manage the carbon budget in the most cost-effective manner.

What Is the Carbon Budget?

To keep temperatures 1.5°C above pre-industrial levels, we have just 420 gigatonnes (Gt) of CO₂ remaining in the global carbon budget. At current rates, this remaining carbon budget is projected to be consumed by 2030 if no reductions are made.