Impacts and Benefits of State and International Carbon Market Systems to Achieve Emissions Reduction Goals

Greenhouse gas (GHG) emissions are projected to continue increasing through 2040, resulting in at least a 1.5°C increase in global temperatures, as modeled by the Intergovernmental Panel on Climate Change (IPCC).¹ The near-term IPCC modeling scenarios include extreme and concurrent hazards, with unequal distribution of warming across geographies and impacts on industries, and socioeconomic communities and populations.² Globally, 41 percent of carbon dioxide (CO₂) emissions are attributed to the energy sector.³ The United States is responsible for 12.5 percent of the global emissions, with China as the second largest GHG emitter.⁴ In efforts to reduce emissions, an increasing number of governments and regulating bodies are employing a variety of policy mechanisms, creating carbon markets to incentivize companies to invest in innovative and efficient clean energy technologies. Among these policies is a cap-and-trade or a cap-and-invest (C&I) framework impacting the largest emitters. The C&I framework is intended to hold industries accountable while allowing individual companies to buy, sell, trade, or invest allowances for carbon emissions.