The International Day of Clean Air for Blue Skies is commemorated annually on 7th September in recognition of the fact that clean air is important for the health and day-to-day lives of people, while air pollution is the single greatest environmental risk to human health and one of the main avoidable causes of death and disease global.

India has one of the highest burdens of emissions of particulate matter (PM), sulfur dioxide (SO2), and carbon monoxide (CO) in the world; second only to China. Air quality across the globe continues to deteriorate due to increasing emissions, threatening human health and contributing to climate change, biodiversity loss, and pollution and waste. Some may blame it on the stubble burning that happens in the states of Punjab and Haryana. Whatever the reason, the citizens suffer from the alarmingly poor quality of air leading to major chronic respiratory disorders. Many residents don’t remember seeing a clear blue sky since urban centers are filled with smoke released from cars and other vehicles along with fog.

According to the World Health Organization, 99% of the global population breathes unclean air, and air pollution causes 7 million premature deaths a year. PM2.5, which refers to particulate matter with a diameter equal to or less than 2.5 micrometers, poses the greatest health threat and is often used as a metric in legal air quality standards. When inhaled, PM2.5 is absorbed deep into the bloodstream and linked to illnesses such as stroke, heart disease, lung disease, and cancer.

In order to take measures, let us first understand what are the major sectors that are contributing to air pollution. From the graph below, we can see the residential sector leads in PM2.5 emissions, with contributions ranging from 27 to 50 %. The power sector is the leading emitter of SO2 (Sulfur dioxide) emissions, with contributions ranging from 44 to 62%. Since a significant amount of coal is consumed in power generation. The power sector is also the leading emitter of NOx (Nitric Oxide)emissions, with its contribution ranging from 24 to 43 percent. While the contribution of households to primary PM 2.5 emissions is highest, coal-based power plants and industrial units also contribute a large share of PM2.5 through secondary particulate matter, which is a result of the transformation of SOx and NOx emissions from gas form to particle form.

Source: CEEW

Going Forward
While as individuals, we can and should reduce the usage of petrol/diesel-based vehicles and opt for EVs or public transport or reduce the usage of fossil fuel based electricity, significant impact is only possible when governments enforce policies for Industries and the general public. Creating policies and passing laws to restrict air pollution has been an important step toward improving air quality.

Here are some of the laws implemented to clean up the air:
In 1970, fueled by persistent visible smog in many U.S. cities and industrial areas and an increase in health problems caused by air pollution, the Clean Air Act paved the way for numerous efforts to improve air quality in the United States.

The United Kingdom first passed its Clean Air Act in 1956 following a deadly smog event that killed many London residents.

In China, where rapid industrial and urban growth in recent decades resulted in a sharp decrease in air quality, numerous laws about air pollution have been passed, including a frequently updated five-year national plan to meet target reductions in air pollution.

In 2013, The Indian Government introduced the National Electric Mobility Mission Plan (NEMMP) to scale up the adoption of zero-emission vehicles, and the accelerated introduction of Bharat Stage (BS) VI fuel in the country. More recently, India’s Ministry of Environment, Forest and Climate Change (MoEFCC) launched the National Clean Air Programme (NCAP) to ensure that India meets its National Ambient Air Quality Standards (NAAQS) within a stipulated time frame.

It is important to note that while laws and regulations have proven impactful, with the rising population and urbanization, the AQI levels are bound to increase. We need technological improvements in affordable purification technology, electrification of transportation systems and better urban infrastructure to reduce the dependence on conventional fuels for millions of citizens to breathe safe air.

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“The last seven years have been the warmest seven years on record, typifying the ongoing and dramatic warming trend,” said Goddard Institute for Space Studies (GISS) Director Gavin Schmidt. 

Statistics don’t scare; Reality does – published on April 8 in Science Advances, another study estimates 100,000 premature deaths in major Indian cities as a result of rapid degradation in air quality and increase in urban exposure to air pollutants hazardous to health.

So, let us all agree on one thing – TIME TO ACT IS NOW.

Held in November 2021, UN’s climate conference COP 26, which is one of the most coveted event on climate change firmly recognised this fact. John Kerry, U.S. Special Presidential Envoy for climate summarised – “We have to make 2020 to 2030 a critical decade of real decisions and real actions… The urgency of what we need to do cannot be overstated.”

For the first time, for the entire duration of two weeks, the world was riveted on all facets of climate change — the science, the solutions, the political will to act, and clear indications of action. And as they say “In the midst of every crisis, lies great opportunity”, resurgence of carbon markets is a true testament to this quote. Corporates, Financial Institutions across the world are rallying to develop/improve market based instruments to combat climate change. Thus, this current article aims to decode carbon markets – history, current trends and future expectations.

Carbon Markets – A journey of a lifetime! 

Conceptual phase – (1979- 1992) – In 1979, the first World Climate Conference recognized that carbon dioxide produced by human activities was potentially dangerous, but it was not until the Earth Summit, held in Rio de Janeiro in 1992, that the international community became fully aware of the gravity of the situation and decided to take action. 

Birth phase – (1997-2005) – The third COP held in Kyoto in 1997 put forward specific objectives to be attained. There, the industrialized countries committed themselves to reducing their GHG emissions by an average of 5.2% by 2012 compared with their 1990 levels as a reference. In order to ensure the effectiveness of these commitments, the Kyoto Protocol adopted a market-oriented approach via a cap-and-trade system. 

Teething phase – (2006-2012) – Initial years of leadership by European countries led to euphoric rise of compliance led carbon market and investments in Renewable energy projects. This was followed by global companies coming together to create a voluntary carbon market. But, the economic meltdown from 2008-10 made sure that carbon market was relegated to back alleys with jobs, economy taking centre stage once again. By the end of 2012, major economies like US withdrew from Kyoto Protocol, thereby, sending carbon markets into a downward spiral and then, a deep slumber.  

Hibernation phase – (2012-2017) – In the absence of any guidance on climate change (especially US government, which started questioning the science behind climate change), compliance markets totally unfolded. Even though small, but voluntary trading of carbon credits between corporates across the world ensured that the fire kept burning. 

Resurgence phase (2017-2021) – Post-COP 25 Meeting 2019, the carbon markets (voluntary) began to get positive indications, and push for renewable energy projects across the globe has given a new lease of life to voluntary carbon mechanisms. Ecosystem Marketplace reports that the voluntary credit transaction volumes doubled between 2017 and 2018 that continued to grow in 2019. Markets continue to grew almost 70% y-o-y despite the pandemic and by 2021 voluntary carbon market breached 1 billion USD mark. 

Chronology 

Carbon Markets – Where we are in 2022?

Held in November 2021, UN Climate Change Conference in Glasgow (COP26) brought together 120 world leaders and over 40,000 registered participants, including 22,274 party delegates, 14.124 observers and 3.886 media representatives. The outcome of COP26 – the Glasgow Climate Pact – is the fruit of intense negotiations among almost 200 countries over the two weeks, strenuous formal and informal work over many months, and constant engagement both in-person and virtually for nearly two years. 

“Either we stop it, or it stops us” – UN Secretary General António Guterres reiterated the need for immediate action required to combat climate change and the subsequent re-joining of all major countries has pushed the markets towards a stable increase in prices. Using the Glasgow pact as a launchpad, several high-profile initiatives like the ones below, have set the ball rolling to achieve net-zero targets:

• Integrity council for Voluntary Carbon market (I – VCM) – aims to create Voluntary carbon credits as a bankable commodity and facilitates ambitious net-zero plans. 
• The Glasgow Financial Alliance for Net Zero (GFANZ) brings together 450 firms committed to finding the US $130 trillion to net-zero transition projects 

India’s Commitment

During the CoP26 Summit, India made bold commitments to achieve net-zero by 2070, challenging the historical contributors by running the talk. PM Modi devised a five-step process called ‘Panchamrita’ describing the roadmap to accomplishing net zero by 2070 in a stepwise fashion.  

Carbon Markets – What the future beckons?

As British PM, Boris Johnson said – “While COP26 will not be the end of climate change, it can and it must mark the beginning of the end”. The last 16 years have seen lots of highs and lows in carbon markets, but the future looks very promising with countries expediting their Net ZERO targets emphasizing sustainable supply chains –

• Forecasts show a 50-80% rise in the Carbon market in 2022, amounting to the US $ 1.5bn to US $1.7bn. 
• Widespread long term demand seen in credits generated from Nature-based solutions and those that meet the requirements of aviation sector, especially CORSIA.
• Carbon markets are acknowledged as an integral part of a holistic Climate change strategy for companies serious in their efforts to net zero. More than 700 large corporates have committed to net zero. 
• Making SDGs  and integral part of carbon standards will ensure continuous increase in profile and price of voluntary carbon credits (especially generated under Verified Carbon Standard, Gold Standard and Global Carbon Council)  
• Blockchain start-ups across the world have entered the realm of the Carbon Market and are working tirelessly to bring transparency and traceability in the market, thereby potentially increasing the adoption, multifold. 

To summarise, climate change action has moved from government corridors to the corporate bylanes and it augurs well for our planet earth as we have seen multiple times in the history, appropriate incentives are the only real tool that can bring colossal behavioural change in mankind. 

“We can do this – we just have to make a choice to do it.” – US President Joe Biden.

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