02-06-2016 - In anticipation of his presentation at PFLA’s 2016 conference in June, we asked carbon market expert Matt Walsh to help us put together a short post highlighting some key points for Canadian forest owners to know about carbon markets.
1. Finally, every country on the planet agrees.
After many years of arguing about whether climate change is a problem and, if so, what to do about it, in December 2015, all 196 countries in the world agreed to a climate change treaty. The treaty imposes obligations on every country to reduce carbon emissions. Yes, even China, India and Saudi Arabia.
2. Canada is now a global leader.
Canada was instrumental in creating an ambitious target for the climate change treaty. In the process, Canada has jumped from equal last on climate leadership to one of the top five countries globally. Domestically, we’ve seen the new Prime Minister challenge the provincial leadership to come up with viable climate change plans. This process is happening right now all over the world.
3. How fast countries transition to a low carbon economy will define economic power in the next decade.
The challenge for every country is to complete this process as quickly and painlessly as possible. Countries who fall behind will become globally uncompetitive as the treaty obligations start to bite. The global economic power structure in the next decade hinges on this transition process.
4. The treaty sent a clear message: pollution is no longer ‘free’.
Investors and business heard this message and are getting out in front of it. Here are two examples:
Since the treaty, investment capital has started to flee heavy emitting industries. The world’s largest investment funds are starting to factor the future cost of carbon into their listed company valuations. This is a major problem for oil companies and any other company that is currently a heavy emitter of carbon. In the near future, the cost of those emissions will appear on every income statement and be included in every company valuation.
Apple, along with 153 other global corporations, has publicly declared its emissions reduction targets and is in the process of implementing a variety of programs to achieve its goals. Carbon offsets are essential for these companies to achieve their targets.
5. A global carbon market is coming.
A global carbon market was specifically provided for in the treaty and work on its design is already underway. The stated goal is to have the market operating by 2020. Regional carbon markets are also in development. You can find more details about what this might look like, and what the expected pricing will be, at the PFLA conference in June.
6. Trees are still the only viable solution.
The role of forestry in addressing climate change is specifically acknowledged throughout the treaty. While a lot of money is currently being poured into technological solutions to climate change, a viable solution, at a planetary scale, is still decades away. Until then, the humble tree holds the key. You can find out more about what this could mean for you as a forest owner at the PFLA conference in June.