Global Carbon Market Utility
The GCMU will plug directly into existing financial and regulatory infrastructure, so that it can help to fill critical climate funding gaps quickly. The GCMU’s structure reflects what regulators expect, what auditors need, and what intermediaries will demand.
This design means the GCMU can:
1.
Improve transparency and unlock demand by maintaining data ledgers designed to withstand audit. These ledgers can also be used by financial intermediaries willing to manage the risk of project reversal.
2.
Use contract forms designed to withstand a legal challenge. By using standard contract forms for carbon credit transactions, VCM participants could rely on a long history of legal precedent for conflict resolution and penalties for breach of contract.
3.
Align with the mandates of regulators. Performance-monitoring data separated by ledger give regulators something to oversee. Right now, climate regulators face hurdles to providing robust oversight of voluntary-carbon-market offsets, because there is nothing to review that fits within their mandate. The GCMU structure splits responsibility along the lifecycle of a credit, so that the right regulators can weigh in at the appropriate junctures.
4.
Template for a mandatory market. Regulators could make offset purchases mandatory if there was an efficient and verifiable way for companies to participate. This would put additional pressure on companies to reduce emissions because they would have to pay for them in one way or another.
The overarching goal—The GCMU will allow buyers to purchase, through intermediaries, financially guaranteed contracts representing standardized units of climate impact. These contracts will contain a guarantee that intermediaries will provide replacement in kind if a project fails, thereby allowing buyers to approach the market with a buy-and-be-done mindset.
Shifting to a portfolio approach removes risk from the buyer and places it with its natural holders—financial intermediaries, such as banks, insurance companies, and private equity groups. The GCMU will provide the transparency auditors need to verify performance.
The GCMU will be a for-profit entity solely owned by the GCMU Governing Council. Any profits distributed will accrue to the benefit of the GCMU Governing Council and will be used toward the Council’s defined charitable mission. The GCMU will ultimately rely on user fees to fund its operations.
