Fitch Rtgs: climate policy change to stimulate demand for carbon offsets


(The following statement was issued by the rating agency) Content Related to Fitch Ratings: Tightening Climate Policy to Boost Carbon Offsetting and Emissions Trading ( site / re / 10134550) Fitch Ratings-London-September 09, 2020: Fitch Ratings says global demand for carbon offsets will increase due to expansion of climate policy beyond utilities – where the costs of reducing carbon are moderate – to heavy industry where adaptation costs are much higher. We are likely to see an expansion in both volume and price offsets, even in the absence of a global carbon market. Emissions from the built environment, transport and agriculture lie largely outside of emissions trading and carbon tax systems today, but are significant and are sources rapidly growing emissions, so offsetting is likely to play an increasing role in these sectors. Replacing carbon offsets from the 1997 Kyoto Protocol era remains a crucial step in fulfilling the commitments of the Paris Agreement. The incentives to strike a deal are important, as free trade in carbon offsets as part of a global agenda could reduce the costs of the Paris Agreement by up to 33% by 2030, or achieve an increase of 50%. % of the reduction for equivalent costs by orienting the mitigation towards the lowest. cost options. Carbon offsets and reduction credits can be broadly classified into nature-based solutions such as afforestation or land management, and technological solutions where emissions in emerging markets are avoided through the adoption of alternatives. low carbon emission. The Paris Agreement assumes rapid growth in emissions from emerging market sectors as levels of development converge, but well-designed offsets offer a potential solution to technology transfer and carbon reduction in the same way. more profitable. The COVID-19 crisis was marked by a fall and then a recovery in the cost of emission rights trading allowances, in particular due to political measures in the European Union. Assuming this degree of political commitment continues, the upward trajectory of carbon prices will likely affect a wider range of energy-intensive industries. Demand for carbon offsets is likely to follow this trend, and voluntary markets are already on an upward trajectory with growing demand from businesses to support net zero emissions targets. The full report, “Tightening Climate Policy to Drive Carbon Offsetting and Emissions Trading”, is available at the link above or at Contact: David McNeil Associate Director, Sustainable Finance +44 20 3530 1942 david.mcneil @ fitchratings. com Fitch Ratings Ltd. 30 N Colonnade, Canary Wharf, London E14 5GN +44 20 3530 1000 Mervyn Tang Senior Director, Sustainable Finance +852 2263 9633 [email protected] Andrew Steel Managing Director, Sustainable Finance +44 20 3530 1596 [email protected] .com Media Relations: Adrian Simpson, London, Tel: +44 20 3530 1010, Email: [email protected] Additional information is available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO SOME LIMITATIONS AND EXCLUSIONS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, THE RATING DEFINITIONS AND TERMS OF USE FOR THESE RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE AT WWW.FITCHRATINGS.COM. 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