Multilingual content from IBKR

Close Navigation
Learn more about IBKR accounts
COP26: A Ray of Hope For A Better Carbon Trading System

COP26: A Ray of Hope For A Better Carbon Trading System

Posted November 16, 2021 at 10:00 am
Interactive Advisors

The climate change talks in Glasgow had outcomes that disappointed just about everyone. Trying to build a consensus among 190-plus country signatories at the COP26 global summit was never going to be easy.

Environmental groups wanted firmer commitments on emission cuts and climate-change funding to less developed countries that scientists say are necessary to prevent the worst scenarios for a climate breakdown later in the century.

global avg surface temperature

China and India watered down language on the needed energy transition away from coal, the dirtiest of the fossil fuels.

Carbon Trading

That said, there was some encouraging progress in setting up a framework for an international carbon-trading market.

The basic concept of such a market has been around for years. Greenhouse gas-producing industries such as utilities, energy companies and heavy industry are given emission targets.

If they stay under the target, they can sell credits to other companies emitting more than their ceiling. If they miss their number, they can offset it by investing in environmental projects that mitigate climate change like reforesting and peatland restoration projects.

Such cap-and-trade approaches are favored among environmentalists and corporate executives alike as a sensible approach to reducing emissions.

Messy Patchwork

Right now, there’s a confusing patchwork of carbon markets regulated to varying degrees and with different standards. China, California and the European Union all have systems in place.

There are also informal carbon-offset markets among companies, in which they generate carbon credits that can be traded to some degree.

For example, companies such as Royal Dutch Shell, Microsoft, and Nestlé buy carbon offset credits.


The U.N. plan in the COP26 accord standardizes the rules of many of these markets and creates the potential for a more robust globally integrated market to use market incentives to lower green-house gas emissions over the long-term.

By making it easier and more transparent for companies and investors to trade carbon credits, the hope is that the market will scale up and attract more investors and participants.

It will take a few years to know whether those hopes are realized. Yet in a climate conference with precious few concrete outcomes, this may end up being one of the more lasting accomplishments.

Originally Posted on November 15, 2021 – COP26: A Ray of Hope For A Better Carbon Trading System


This piece is provided as educational information only and is not intended to provide investment or other advice. This material is not to be construed as a recommendation or solicitation to buy or sell any security, financial product, instrument, or to participate in any particular trading strategy.

Disclosure: Interactive Advisors

This material is not intended as investment advice. Interactive Advisors or portfolio managers on its marketplace may hold long or short positions in the companies mentioned through stocks, options or other securities.

Pursuant to the Investment Management Agreement between Interactive Advisors and its clients, all brokerage transactions occur through Interactive Brokers LLC, an affiliate of Interactive Advisors. Interactive Advisors does not offer services through any other broker-dealer. The use of an affiliate for brokerage services represents a conflict of interest. Interactive Advisors clients acknowledge this conflict of interest and authorize Interactive Advisors to execute transactions through Interactive Brokers LLC when they open an Interactive Advisors account. Clients should consider the commissions and other expenses, execution, clearance, and settlement capabilities of Interactive Brokers LLC as a factor in their decision to invest in an Interactive Advisors Portfolio. Interactive Advisors believes it can meet its best execution obligation by trading its clients’ trades through Interactive Brokers LLC. While there can be no assurance that it will in fact achieve best execution, Interactive Advisors does periodically monitor the execution quality of transactions to ensure that clients receive the best overall trade execution pursuant to regulatory requirements.

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Interactive Advisors and is being posted with its permission. The views expressed in this material are solely those of the author and/or Interactive Advisors and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

IBKR Campus Newsletters

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.