By turning to market incentive mechanisms as opposed to a command-control approach, carbon finance has allowed both developed and developing countries to make significant progress toward achieving the 1.5 billion tons objective of carbon dioxide emissions reduction. According to the prediction of Louis Redshaw, head of environmental markets at Barclays Capital, "carbon will be the world's biggest commodity market and could become the world's biggest market overall."
With regard to emissions reduction, there have been wide disparities between the North and the South. Since 2005, for example, the European Union has developed the first large emissions trading system known as the European Union Emissions Trading Scheme (EU ETS), which covers 11 000 power stations and industrial plants in 30 countries. It is working towards a 21% reduction in emissions by 2020—an indicator of success. The South on the other hand, has been lagging behind.
The future scope of the market is still unclear. The lack of a clear regulatory future, the stagnation of traded volumes and the risk of a fragmentation of carbon markets count among the most significant uncertainties. Yet, there are reasons to remain optimistic: the carbon market is in fact in the process of reinvigorating itself, primarily in Africa that holds one of the greatest potentials for participation in that market.
