ONE of the achievements of the recent UN Climate Change Conference (COP26) in Glasgow that has not received much attention was the forging of an agreement to reform global carbon markets and improve rules governing carbon trading. Carbon trading, although still problematic in certain respects, is considered a vital tool to encourage the transition to sustainable energy and provide funds for climate mitigation and adaptation initiatives. Unfortunately, it is a tool that seems much too large for the Philippines to grasp unless there is a significant improvement in imagination and competence in the next administration.

Carbon trading is a system by which the government sets a limit on the total amount of carbon that can be emitted within a certain time period (a month or a year), expressed in metric tons, and then allocates the carbon on a unit basis to different individual industries, businesses or sectors. These units can then be traded like any commodity; in fact, there is already a lively market for carbon in some parts of the world — the price for carbon futures on the European market as of December 6, for example, was 81.25 euros/MT, about 22 euros higher than it was a month ago.

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