The carbon market's last hurdle

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We're wrapping up our Climate Week coverage today, but there's still plenty to catch up on at Bloomberg.com. Don't miss our scoop on Colombia's $40 billion green plan. In today's newsletter we're focusing on carbon credits, which generated quite a bit of enthusiasm this week. Even Brazil's Marina Silva seems optimistic about their potential for fixing climate change. But are they really ready for prime time? Read on for more details — and to get unlimited access to climate and energy news, please subscribe.

The last big hurdle

By Natasha White What, exactly, is a carbon credit? That's a question that still has some of the smartest legal minds scratching their heads decades after the first offset project was launched in Guatemala in 1988. In theory, a carbon credit is a certificate representing a one-ton drop in greenhouse gas emissions tied to projects such as a wind farm or a tree-planting scheme. They're bought by companies to compensate for the pollution they produce somewhere else in the world. But, when it comes to the laws that underpin financial markets, the answer to that question isn't yet clear. Until it's solved, banks and investors are unlikely to allocate anywhere near the billions of dollars that proponents expect to flow to carbon credits — contrary to the enthusiasm on show at Climate Week in New York this week. Read More: US Treasury's Adeyemo Talks Up Voluntary Carbon Market "The vast majority of countries don't currently have a clear answer to the question of what is a carbon credit, as a matter of law," said Simon Puleston Jones, managing director of Emral Carbon, a brokerage and advisory firm, and former capital markets lawyer at law firm Simmons & Simmons. That "matters because if you've bought something from me and are suffering an economic loss, your loss might not be recoverable," he said. Photographer: Andrew Caballero-Reynolds/Bloomberg The World Bank and the International Institute for the Unification of Private Law (Unidroit), an intergovernmental organization, are working on a set of principles to help guide governments globally on the question. The main deliberation focuses on whether a carbon credit is an asset, according to Belinda Ellington, a member of the Unidroit working group and former associate general counsel at Citigroup Inc. in London. "Carbon credits don't fit neatly into any jurisdiction's current interpretation of the definition of an asset," Ellington said. "If you've bought something that has no legal identity as an asset, the effect is you cannot be certain you own anything." In the UK, the Law Commission of England and Wales recently concluded that carbon credits "might" be considered digital assets, a new, third type of property. (The two other types of property under English law are tangible things in possession, like a pen or a house, and intangible things in action, like a contract.) But for Puleston Jones, the commission's failure to be decisive over a legal definition means "we're no further down the line of understanding what a carbon credit is" and the matter will now be decided by the courts over decades. "It's a wasted opportunity," he said.  Continue reading the full story on Bloomberg.com.

Shrinking value $1 billion This is roughly the size of the voluntary carbon market in 2023 -- which is about a quarter smaller than the previous year after a string of greenwashing scandals spooked buyers and cut demand.

Make it legal  "We want carbon markets to become as tradable as equities markets or derivatives markets or debt markets or commodities markets. [That requires] trust, certainty and integrity." Simon Puleston Jones Managing director of Emral Carbon, a brokerage and advisory firm Lawyers say carbon credits need a legal definition to become an asset as tradable as stocks and bonds.

Brazil's Marina Silva wants to reset a debate

By Zahra Hirji and Simone Iglesias Forest carbon credits, which pay governments and private landowners to conserve carbon-rich forests as a way to slow climate change, face mounting criticism for being less effective than advertised. Brazil's top climate official is pushing back on their dubious reputation. "There's already this story that forest credits don't count," Marina Silva, Brazil's minister of the environment and climate change, told Bloomberg News this week. "Come on — this is an opportunity for those who have forests, because they provide a fundamental service for the balance of the planet." Marina Silva Photographer: Ton Molina/Bloomberg In case you missed it Colombia is looking to a future without oil. The Latin American nation is set to announce a $40 billion investment plan aimed at replacing fossil-fuel export revenues that are expected to decline after the country ended new oil and gas exploration two years ago. Susana Muhamad, Colombia's environment minister, told Bloomberg Green during an interview at Climate Week that she will make the plan public at an economic fair on Oct. 2. She hopes that as much as $10 billion will come from international financial institutions and developed countries. Investors are obsessed with carbon mitigation. This is just one of the thoughts from Marisa Drew, chief sustainability officer at Standard Chartered Plc, who spoke at the Bloomberg Sustainable Finance Forum on Thursday. When it comes to mobilizing capital with the goal of achieving net zero emissions, there should be a focus on funding adaptation, or making property and infrastructure more resilient to the physical impacts of climate change, she said.  Climate change is causing chaos in the US. "Every three days we have a federal disaster or some type of emergency declaration," said Victoria Salinas, acting deputy administrator of the US Federal Emergency Management Agency, who was also speaking at the Bloomberg Sustainable Finance Forum on Thursday. More from Green Hilton, Marriott and Chipotle all claim to be green, yet they're also bankrolling groups that lobby against pivotal legislation for cutting greenhouse gas emissions. This week Bloomberg Green investigates how much is being put toward forces opposing corporate climate action and why this matters to keeping the world on track toward net zero. Chipotle is a key member of the Restaurant Law Center, an industry group that is suing and supporting litigation to beat back pivotal climate rules. Photographer: Patrick T. Fallon/Bloomberg Indonesia's wind power target cut is a big blow. The mostly coal-power-fueled country plans to install less wind capacity than envisaged under an international energy transition plan, a disappointment for those hoping for a bigger role for renewables in Southeast Asia's top emitter. Investors are looking to fix a charging gap in the US. Hundreds of millions of dollars in grants awarded by state and federal programs have helped spur an influx of spending to develop EV chargers for the heaviest US trucks.  There's a race to save America's seeds. Native plants are being replaced by invasive weeds thanks to climate change, with grave consequences for humans and animals. The small industry trying to stem the tide is struggling.  You can't miss this Climate change is moving country borders.  Switzerland and Italy tweaked their mountain border under the Matterhorn peak as climate change in the Alps is melting the glaciers that have historically marked the frontier between the two countries. "Significant sections of the border are defined by the watershed or the ridge lines of glaciers, firn or perpetual snow," the Swiss government said Friday in a statement. "These formations are changing due to the melting of glaciers." Europe is the world's fastest-warming continent, and the impact is being seen most dramatically in areas such as the Alps, where glaciers have lost 10% of their remaining volume over the past two years. Skiing near the Guide del Cervino hut at Testa Grigia peak between Zermatt, Switzerland, and Breuil-Cervinia, Italy. The two countries are adjusting their borders as alpine glaciers melt. Photographer: Fabrice Coffrini/AFP/Getty Images Worth a listen Scientists have been trying to understand — and mimic — the way the sun produces energy for centuries. But recreating the energy-generating process of nuclear fusion here on Earth presents an array of technical challenges. Bob Mumgaard, CEO of Commonwealth Fusion Systems, began working on some of those challenges as a doctoral student at MIT. Now backed by more than $2 billion, CFS is well on its way to making the long-held dream of nuclear fusion a reality. On this week's Zero, Mumgaard breaks down the science behind CFS's bagel-shaped tokamak reactor, and explains why he believes the nuclear fusion industry is just getting started.  Listen now, and subscribe on Apple,  Spotify, or YouTube to get new episodes of Zero every Thursday.

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