In recent years, the carbon market has emerged as a critical mechanism in the global fight against climate change. Comprising various frameworks, including carbon taxes, emissions trading systems (ETS), and voluntary carbon credits, these mechanisms serve multiple functions. They incentivise businesses to reduce emissions while ensuring compliance with regulatory mandates.
As countries and industries aim to achieve their net-zero targets, a comprehensive understanding of the diverse carbon market landscape becomes essential.
Recently, Gabriel Nam, Director at Mercuri Urval (MU), engaged in a discussion with industry experts over morning coffee to gather critical insights on this relevant topic. This article summarises the key perspectives shared by Sammie Leung (PwC), Sorouch Kheradmand (Schneider), and Anna Stablum (ClimeCo) regarding the challenges, opportunities, and future landscape of carbon markets.
The carbon market faces several hurdles, including fragmented regulations, delayed guidance from the Paris Agreement, integrity concerns, and insufficient incentives within the voluntary market.
Inconsistent standards and volatile pricing contribute to a perception of complexity and risk, deterring industries from investing meaningfully in carbon markets.
Despite slow progress, the number of carbon pricing instruments is increasing. In 2025, these instruments were expected to cover 65% of the global GDP, indicating a trend toward more robust carbon markets.
Recent evaluations reveal that certain projects, particularly some avoided deforestation credits, have over-credited or under-delivered. This highlights the risk of using offsets as a substitute for direct decarbonisation. The market is evolving with integrity-focused measures, such as quality filters, to reinforce the importance of reducing direct emissions.
Skepticism regarding the use of offsets as a shortcut is warranted; however, it primarily reflects governance challenges. Offsets should serve as a last resort following direct decarbonisation efforts. Initiatives aimed at operational decarbonisation should be prioritised, as companies have numerous avenues to reduce emissions with payback period below two years.
Research indicates that companies utilising carbon credits often take their decarbonisation efforts more seriously, using credits responsibly to finance innovation and support environmental initiatives.
Sectors such as aviation, maritime, heavy industry, cement, and energy are poised to seek carbon market solutions to curb emissions, driven by regulatory pressures and compliance requirements.
These hard-to-abate sectors are expected to rely increasingly on carbon markets due to their long asset cycles and extended timelines for implementing energy-efficient solutions and sustainable fuels.
Carbon markets will affect all companies across both demand and supply sides. Industries can monetise emission reductions by trading carbon credits and/or integrating insets within their value chains, while nations adapt to the evolving carbon pricing landscape.
There is a notable shortage of expertise in carbon accounting, policy design, and trading. To address these gaps, organisations should invest in integrated curricula, standards-led training, and pilot programs.
Professionals with a blend of environmental science knowledge and financial acumen are crucial for mitigating greenwashing risks and simplifying sustainable practices within the carbon market.
Countries like Singapore are actively developing initiatives to enhance carbon market-related talent through university and polytechnic courses, which companies can leverage for workforce upskilling.
Sammie Leung:"What makes the carbon market exciting is that we’re not just trading credits—we’re shaping a new asset class that channels private capital into tangible climate action at scale."
Anna Stablum: "It does feel like a long journey to get carbon markets up and running, especially with the climate urgency in mind. But we must remain optimistic—under the Paris Agreement, they are finally becoming operational."
Sorouch Kheradmand: "It's noteworthy that AI can support a significant portion of the manual work and address the 'knowledge bottlenecks' prevalent in the ESG space."