GenZero Climate Summit: Carbon Price Trajectory, Credibility Matters More Than Level in Decarbonization, Says Panel

The carbon pricing debate has long focused on whether prices are high enough, but panelists at the GenZero Climate Summit on Tuesday argued that long-term decarbonization depends less on the spot price on any given day and more on whether businesses can plan around a credible, durable and predictable tightening trajectory over time.

The market’s fixation on price levels has obscured the more important question of price design. Without the structural conditions needed to make long-term capital allocation rational, even a high carbon price will not move the needle on real economy decarbonization, the panel noted.

“Carbon pricing works when it’s credible, when it’s durable, and it’s trajectory-driven,” said Matt Kean, chair of Australia’s Climate Change Authority. “It’s not one of those items. It’s all of them. You get design, you get momentum, you have to get everything working together.”

Australia’s Safeguard Mechanism is an example of trajectory-driven carbon pricing. It survived the repeal of Australia’s carbon price in 2014 and several political cycles, and it gives industrial facilities a predictable baseline path, with baselines falling 4.9% annually. This allows long-term capital decisions to be made against a forward curve rather than day-to-day price moves.

“Facilities know where their baseline prices are headed. That forward certainty drives investment, not a spot price on any given day,” Kean said.

On credit quality, panelists said the market has moved beyond the period when quality itself was the central crisis, pointing to better verification technology, methodologies and a growing price premium for higher-rated credits.

Mandy Rambharos, chief executive officer of Verra said: “Credits carrying the ICVCM Core Carbon Principles label or equivalent ratings are fetching roughly four times the price of lower-quality credits.”

ICVCM refers to the Integrity Council for the Voluntary Carbon Market, an independent global governance body which sets and enforces high-quality standards for carbon credits.

She added that crediting programs should use a common standard to avoid confusion and lowering the quality bar.

Panelists agreed that trust matters more than price or volume, and that governments must set clear policy direction to reduce uncertainty. Buyers and investors, they said, need confidence that the market is delivering high-quality credits. That link between policy credibility, market infrastructure and credit quality will determine whether capital flows into the transition or remains on the sidelines.

—Reporting by Sang Ah Lee, slee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com