Greenhouse gasses drive climate change – yet we also understand that climate change is a data, information, and communication problem.
Misinformation abounds, and we thought, what better way to uncover misconceptions about the carbon landscape than by picking ChatGPT’s “brain”?
ChatGPT, after all, assimilates its knowledge from the collective knowledge of the internet. Through a conversation with the AI chatbot everyone’s talking about, we hope to uncover some of the misconceptions still circulating about carbon emissions, carbon markets, and emissions reduction – as well as highlighting what the chatbot gets right.
Climate Vault: Hello!
ChatGPT: Hi! How can I help you today?
CV: We’d like you to tell us about the carbon markets.
ChatGPT: Carbon markets are economic systems that allow countries, companies or organizations to buy and sell rights to emit greenhouse gasses, most commonly carbon dioxide. The idea behind these markets is to provide incentives for reducing emissions by setting a limit or “cap” on emissions and allowing entities to buy and sell allowances that represent the right to emit a specific amount of carbon dioxide. The goal is to reduce emissions by putting a price on them, making it more expensive to emit and cheaper to reduce emissions. The most well-known carbon market is the European Union Emissions Trading System (EU ETS), which covers more than 11,000 power plants and industrial facilities in Europe.
CV clarification: Keep in mind that these rights to emit don’t necessarily have to be purchased before the emissions take place.
CV: It’s also important to note the differences between the markets themselves – what are the differences between the voluntary and compliance carbon markets?
ChatGPT: The voluntary and compliance carbon markets refer to the two main types of carbon markets
Voluntary Carbon Market: In this market, participants purchase carbon credits on a voluntary basis, with the aim of offsetting their own greenhouse gas emissions and reducing their carbon footprint. These purchases are not legally required and the credits are not considered to be a form of compliance with emissions reduction targets.
Compliance Carbon Market: In this market, participants are legally required to reduce their emissions and purchase carbon credits to meet their emissions reduction targets. This type of carbon market is designed to achieve compliance with emissions reduction commitments under international agreements such as the Paris Agreement or domestic regulations.
In compliance carbon markets, the price of carbon credits is determined by supply and demand and can vary widely depending on the success of emissions reduction efforts and the overall level of compliance. The voluntary carbon market is generally less structured and the price of credits is often lower, reflecting the voluntary nature of the transactions.
CV Clarification: We’ve highlighted more detailed differences between the CCMs and VCMs here. Some distinctions to highlight:
- Offsets in the voluntary markets aren’t necessarily verified by any regulatory agency and are available in greater abundance than the emission allowances on the compliance market.
- While supply and demand regulate prices on both markets, compliance market supply is set by the governmental body issuing the emission allowances. These limited allowances are also more easily tracked and verified.
- Additionally, organizations like Climate Vault can participate in the compliance markets even though they aren’t legally obligated to, allowing them to leverage emission allowances for carbon reduction commitments.
CV: Speaking of reducing emissions, can you tell us a joke about net zero?
ChatGPT: Sure! Here’s a joke about net zero:
Why did the chicken cross the road to get to the net zero farm?
To prove that it was possible to reduce emissions while still getting to the other side!
CV: What is the difference between an emission allowance and a carbon offset?
ChatGPT: An emission allowance and a carbon offset are two different types of financial instruments used in the context of carbon markets.
- Emission Allowance: An emission allowance is a permit that gives the holder the right to emit a certain amount of greenhouse gasses, typically carbon dioxide, within a specified period. In compliance carbon markets, companies are required to hold a certain number of allowances equal to their emissions, and they may buy and sell allowances as needed to meet their emissions reduction targets.
- Carbon Offset: A carbon offset is a credit representing a reduction in greenhouse gas emissions achieved by a project that is separate from the entity buying the credit. For example, a company may buy carbon offsets generated by a renewable energy project to offset its own emissions. Carbon offsets can be bought and sold in both the voluntary and compliance carbon markets, and they can help companies meet emissions reduction targets or simply reduce their carbon footprint.
In summary, emission allowances are directly linked to the emissions of a specific company or facility, while carbon offsets represent emissions reductions achieved elsewhere.
CV clarification: ChatGPT almost got it down pat. Carbon offsets are – importantly – regulated only by the bodies that issue them, meaning that quality and impact vary from offset to offset. Offsets don’t have to be tracked and verified in the same way as emission allowances, and thus don’t serve the same purposes.
CV: Could you maybe tell us your best joke about carbon emissions?
ChatGPT: Here’s a joke about carbon emissions:
Why did the carbon molecule break up with oxygen?
Because it was getting too hot to handle!
CV: That was better than your chicken joke.
ChatGPT: Thank you! I’m glad you liked it.
CV: What are some downsides to the different (voluntary and compliance) carbon markets?
ChatGPT: Carbon markets, both voluntary and compliance, have some downsides that can limit their effectiveness in reducing emissions:
Voluntary Carbon Market:
- Lack of Regulation: The voluntary carbon market is less regulated and standardized, which can make it difficult for consumers to verify the quality and validity of the offsets they are purchasing.
- Limited Impact: Since participation in the voluntary carbon market is voluntary, the overall impact on emissions reduction can be limited.
Compliance Carbon Market:
- Allowance Allocation: The allocation of emission allowances in compliance carbon markets can be politically influenced, leading to concerns about fairness and the distribution of costs among different companies and industries.
- Market Instability: The price of carbon allowances in compliance markets can be volatile, which can make it difficult for companies to plan and invest in emissions reductions.
- Leakage: Compliance carbon markets can result in emissions reductions being shifted from regulated regions to unregulated regions, a phenomenon known as “leakage”.
Additionally, both voluntary and compliance carbon markets can be criticized for allowing companies to continue emitting greenhouse gasses as long as they purchase sufficient offsets or allowances, rather than requiring direct reductions in emissions.
CV clarification: ChatGPT got its wires crossed with the compliance markets. While allowance allocation is a governmental action (and therefore political), regulatory bodies are steadily decreasing the total supply of allowances, meaning that total emissions from companies legally obligated to participate in the markets will fall.
In terms of market (in)stability, the compliance markets are historically stable. Just like any market that depends on supply and demand, price varies based on what’s available. Companies that need to purchase allowances on short notice in a market where few are available will have to pay a premium. This pressure from the market motivates these companies to reduce their scope 1, 2, and 3 emissions.
Finally, leakage: While companies may consider moving geographic locations to skirt emission laws, the larger a company is, the harder it is to move. Companies that participate in the compliance market are often quite large, meaning that while they may want to move, it may be too difficult to do so.
CV: So, what do you think a company called Climate Vault does?
ChatGPT: Without knowing more information, it is difficult to say with certainty what a company named Climate Vault does. However, based on the name, it’s possible that the company is involved in the storage or protection of climate-related data, information, or assets.
If you would like to know more, I recommend reaching out to the company directly or visiting their website for more information.
CV clarification: We agree that people can get in touch to learn about what Climate Vault does. In short, we use an innovative approach to leverage carbon emission allowances from the compliance markets into permanent carbon dioxide reduction technologies. This delivers a one-two punch to knock out carbon footprints in days, not decades.
For a more in-depth look into how this leveraging occurs, curious parties can check out our resources page to read more. You can also get in touch with the team to discuss our revolutionary approach to reducing & removing carbon emissions for your organization.
CV: Write us a haiku about Climate Vault!
ChatGPT: Climate Vault strikes strong,
Compliance markets leveraged,