How can the carbon market evolve to help increase penetration of EVs?
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Jan 26, 2022
Presented by CIBC

Whether compliance or voluntary, carbon credits are an innovative financing tool which can help to incent behaviour and CIBC is part of a new solution to turn them mainstream.

Carbon credits may offer an innovative way for electric vehicles to better penetrate the market.

Whether compliance or voluntary, carbon credits are an innovative financing tool which can help to incent behaviour and CIBC is part of a new solution to turn them mainstream

This article is partner content presented by CIBC.

One tool that could prove useful to aid Canada’s transition to a low carbon economy are carbon credits, which are used by governments, including several U.S. states, China and Europe to incent automakers to produce and sell environmentally friendly vehicles. A carbon credit is a unit of carbon equivalent that is either removed or avoided from the atmosphere according to a set of protocols determined by either regulators or third party registries.

In 2018, Verra, which manages the leading global program for the certification of GHG emission reduction projects, approved a voluntary carbon credit methodology for EV charging systems. The Verra methodology encourages further investment in EV charging infrastructure, which could be a catalyst for wider EV adoption. However, once these credits are generated, transacting them is challenging.

There are two types of carbon markets: compliance and voluntary. 

The compliance markets are dictated by government or industry regulation and ascribe a value to carbon for approximately 21.5% of emitted CO2 today. 

A voluntary carbon credit represents a claim on one tonne of carbon emissions and is generated through the avoidance or reduction or removal of greenhouse gases from the atmosphere. They are issued when projects adhere to specific protocols drafted by registries and further audited by verification bodies. 

Historically, it has been difficult for buyers and sellers to connect to execute a transaction in the voluntary carbon markets due to a lack of market infrastructure. Even though the voluntary carbon credit market has been in existence for more than 15 years, it has struggled to gain scale for a number of structural reasons. 

But a recent development may help solve this complexity and make it easier for those generating voluntary credits from EV charging systems to transact and sell these credits as the infrastructure develops.

In July 2021, “Project Carbon”, an international joint effort between four international banks, CIBC, Itaú Unibanco, National Australia Bank and NatWest Group, was launched. Project Carbon aims to support a thriving global market for voluntary carbon credits with clear and consistent pricing and standards. Its goals are improving transparency of voluntary carbon market transactions, increasing market efficiency, providing a trusted platform on which to settle transactions and allowing stakeholders to assess the quality of credits available. Simply put, Project Carbon aims to address the structural issues that have plagued the voluntary carbon markets over the years.

Carbon credits are an additional tool which can help to achieve our climate ambition because ultimately, we all have an important role to play in tackling the climate emergency. We must act with decisiveness and purpose as we continue to innovate to move to a greener future.

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