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Delaying carbon emissions has a positive climate impact. In turn, delaying climate action is detrimental for humanity - we should fight climate change now. How can an investor do so? By buying EUAs, carbon allowances from the EU ETS.
Delaying carbon emissions has a positive climate impact. In turn, delaying climate action is detrimental for humanity - we should fight climate change now. How can an investor do so? By buying EUAs, carbon allowances from the EU ETS.
CO2 emissions drive global warming, trapping heat and disrupting ecosystems. Once emitted, CO2 persists for centuries, perpetuating climate change. Delaying emission reductions makes achieving climate goals harder, such as those in the Paris Agreement aiming to limit global warming below 2°C. The IPCC confirms CO2's irreversible impact, with past emissions affecting climate for centuries. Timely action is crucial to stabilize temperatures and mitigate severe climate events like heatwaves and sea-level rise. Climate models suggest up to 5°C increases without swift action, risking global health and habitation.
Buying and holding carbon allowances is equivalent to delaying CO2 emissions. During the time of investment, industries see the overall carbon budget available to the economy reduced. After the sale of your allowances, you indeed give those volumes back to the EU-wide cap. But delaying emissions by itself has a positive climate impact.
CO2 emissions are a major contributor to global warming and climate change. When released into the atmosphere, CO2 traps heat, leading to a rise in global temperatures and disrupting ecosystems worldwide. The harm caused by CO2 emissions is irreversible; once emitted, CO2 can persist in the atmosphere for hundreds to thousands of years, continuing to contribute to climate change over time. Delaying emission reductions exacerbates this issue, making it increasingly challenging to achieve humanity's climate objectives.
For instance, research by the Intergovernmental Panel on Climate Change (IPCC) underscores the irreversible nature of CO2 emissions. According to their latest assessment report, even if emissions were halted today, the impacts of past emissions would continue to affect the climate for centuries.
The decision to delay emission reductions has significant implications for global climate goals. Waiting until the last minute to reduce emissions makes it increasingly difficult, if not impossible, to limit global warming to well below 2°C above pre-industrial levels, the main climate target outlined in the Paris Agreement. The World Meteorological Organization (WMO) states that there is an 80% likelihood that the annual average global temperature will temporarily exceed 1.5°C above pre-industrial levels for at least one of the next 5 years.
Climate scientists at Imperial College London have conducted research on the topic - they found that extending the peak of global emissions by just 10 years could result in an additional temperature increase of approximately 0.5°C by the year 2100. This delay not only intensifies the severity of climate impacts but also reduces the window of opportunity to implement effective mitigation strategies.
The link between delaying emission reductions and global temperature rise is well-documented in scientific literature. As emissions continue unabated, the Earth's temperature trajectory shifts upward, leading to more frequent and severe climate events such as heatwaves, storms, and sea-level rise.
Recent climate models and projections highlight the critical role of timely emission reductions in stabilizing global temperatures. The UCAR Center for Climate Education projects that with high levels of CO2 emissions, global temperatures could rise by up to 5°C above pre-industrial levels. Such an increase would pose severe risks to human health globally and could render many areas on Earth uninhabitable.
Despite the challenges posed by delaying emission reductions, there are possibilities to mitigate these effects and accelerate climate action. Policymakers and stakeholders can prioritize investments in renewable energy sources, energy efficiency improvements, and sustainable transportation initiatives. By promoting innovation and scaling up clean technologies, countries can reduce their dependence on fossil fuels and curb emissions effectively.
By purchasing physical spot carbon allowances, an investor effectively reduces the overall available carbon budget, thereby reducing carbon emissions released by industries today. When these allowances are later sold back as EUAs, the corresponding emissions may be released again by industry. However, delaying these emissions already has a positive climate impact, as described by the factors outlined above.
Delaying emissions can incentivize industries to adopt greener technologies. This shift is facilitated by carbon markets and investors, which pressure industries to decrease their carbon footprint. Even if industries retain the option to release carbon in the future, adopting less carbon-intensive procedures can contribute significantly to keeping the planet within certain temperature thresholds.
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