carbon market

Syllable breakdown

Dictionary meaning

a trading system in which carbon dioxide emissions are given an economic cost, creating financial incentives for emitters to reduce their greenhouse gas output; compliance carbon markets, such as the European Union Emissions Trading System, set a cap on total emissions and allow companies to buy and sell emission allowances within that cap; voluntary carbon markets allow companies and individuals to purchase carbon credits from projects that sequester or avoid emissions, such as reforestation and renewable energy; carbon markets have been central to climate policy architecture since the Kyoto Protocol but remain controversial because of concerns about permit over-allocation, the credibility of offset projects, and whether carbon pricing alone can drive the pace of decarbonisation required to meet the Paris Agreement targets