Breaking Through the Noise

Key Takeaways from the Inaugural RBC Capital Markets Carbon Markets Conference

By Brian Hong and Julia-Maria Becker
Published December 1, 2023 | 7 min read

Key Points

  • The carbon markets are growing and critical for reaching net-zero
  • Inaction is the worst option
  • Empowering Indigenous communities and harnessing nature will drive impact
  • Carbon removals hit the mainstream
  • The Carbon Markets Respond – Enhancing Credibility

On November 21, 2023, RBC Capital Markets, in partnership with ClearBlue Markets, hosted its inaugural Carbon Markets Conference against a backdrop of accelerating growth and heightened scrutiny. These interconnected but opposing forces have created a market that is increasingly difficult to navigate. The objective of this conference was to break through the noise and make sense of key market trends with the help of leading global experts. While there were diverse views on what shape the market will take, all agreed that the carbon markets are critical to achieving global climate targets.

Here are the top five takeaways from the conference:


The carbon markets are growing and critical for reaching net-zero

Based on the headlines over the past year, it would be reasonable to think that the carbon markets are in decline. However, according to speakers Michael Berends, CEO ClearBlue Markets, and Jennifer McIsaac, VP, Market Analysis, ClearBlue Markets, the opposite is true. A common misconception is equating what’s happening in a small portion of the voluntary carbon markets, where corporates purchase carbon credits as part of their sustainability commitments, to the market as a whole, which is largely made up of compliance carbon markets managed by governments or supranational bodies. Compliance carbon markets represent over 99% of the total traded value of the carbon markets and are projected to top $1 trillion this year while covering roughly 25% of global emissions. These markets continue to grow, drive positive climate impacts and are seen as one of the most effective tools for reducing carbon emissions. Despite challenges within the voluntary carbon markets, they too are still poised for rapid growth as evidenced by the billions invested in technology-based carbon removals in 2023.

These markets are critical for reaching net-zero. Thomas Kansy, Partner at McKinsey & Company, put it simply: The “net” in net-zero represents carbon removal credits, so if you believe in net-zero then you also believe in carbon credits. Market analysts currently predict that with available technologies, there will be roughly 10 gigatons of residual emissions that will need to be addressed annually by 2050. The only feasible way to do this is by investing in projects that can remove emissions from the atmosphere. The most economically efficient way to provide this capital at scale is through the carbon markets.


Inaction is the worst option

A chill went through the voluntary carbon markets in 2023 as companies faced heightened scrutiny, panelists acknowledged. While projects criticized by the media are not representative of the overall market (ClearBlue Markets confirmed that there are thousands of projects delivering the underlying avoidance or removal of emissions), some of the concerns around project development, baselines and additionality are valid and need to be addressed, experts said.

However, the heightened scrutiny has led to “greenhushing”, a term that describes when companies choose not to communicate their sustainability efforts, and a reduction in the use and public retirement of voluntary offsets. Corporations were punished for being early adopters and accused of greenwashing, while inaction was perceived to be a safer short-term strategy. Speakers agreed that the days of getting by while doing nothing are numbered and the risks the early leaders have taken will ultimately pay-off in the longer-term.

In addition to scrutiny, participants in the voluntary markets face criticism that carbon credits are used as an excuse for inaction by corporations. According to Julia-Maria Becker, Vice President, Environmental Markets Solutions Group at RBC Capital Markets, sophisticated actors who dedicate meaningful budgets to their voluntary carbon market strategy are typically decarbonizing the fastest. They see carbon credits as a tool in the toolbox, but not the sole solution for addressing climate change. 

Ultimately, green vigilantism has led to “perfect” being the enemy of “good” — to the detriment of actual progress towards net-zero, multiple speakers observed. The worst option for advancing the shared goal of a net-zero world is to do nothing and to stop providing capital for cost-effective climate positive projects. As McKinsey’s Kansy noted, the atmosphere doesn’t care where the emission reductions happen.


Empowering Indigenous communities and harnessing nature will drive impact

Investing in nature today buys us the time needed to scale the technology-based carbon removals we will rely on in the future. That was the advice of speaker Steven Nitah, Managing Director of Nature For Justice. Nitah co-founded the First 30x30 Initiative with Ducks Unlimited Canada and Nature Focus Development to drive investment toward Indigenous-led conservation. Steven’s words were supported by a recent study published in the journal Nature, which shows that protecting existing forests and restoring degraded ones could capture one-third of the total emissions released into the atmosphere since the industrial revolution. Speakers agreed that empowering Indigenous communities to lead the protection and restoration of nature is one of the most economically and environmentally impactful ways to achieve Reconciliation. Steven highlighted that Indigenous peoples make up only 5% of the world’s population, yet they are responsible for over 80% of the world’s remaining biodiversity, making it imperative that they are actively engaged and empowered to lead this work.

Industry experts at the conference also brought clarity to recent criticisms toward nature-based carbon credits which have primarily focused on a small number of projects in developing countries. There was broad agreement that most projects generate tremendous positive impact. Bryan Gilvesy, CEO of ALUS, a farmer-led organization that helps farmers implement sustainable agricultural practices, shared how they see a 300% increase in beneficial insects and pollinators in year one of their projects — a strong indication of rebounding biodiversity. He says sequestering atmospheric carbon into soil represents one of the largest climate opportunities. Dani Warren, Corporate Administrator for the Coastal First Nations Great Bear Initiative, also shared her perspectives regarding the environmental impacts and community benefits of their carbon project.

All tools are needed to combat climate change and it is clear that nature and the Indigenous communities that support it will play an increasingly important role.


Carbon removals hit the mainstream

2023 has been a breakthrough year for the nascent but fast-growing technological carbon removal sector that aims to sequester carbon from the atmosphere, and then store it permanently underground, in the deep ocean, or in products. To keep the planet from warming 2 degrees Celsius from pre-industrial levels, it is not enough to simply halt carbon emissions: humanity must also remove over 800 gigatons of carbon from the atmosphere, remarked Fred Lalonde, Co-founder of Deep Sky, an ambitious carbon removal company based in Montreal. This will require infrastructure that rivals the global oil and gas industry today, and all of it will need to be built within the next three decades. While this is a daunting challenge, Fred believes it also represents one of the greatest economic opportunities in human history for those who can figure out how to do it.    

Marty Reed, Co-Founder of Evok Innovations, a private equity firm focused on clean-tech solutions, noted that while Canada is well positioned to lead in this growing sector, it must quickly adapt its incentives to align with the Inflation Reduction Act in the US or risk falling behind.

Mitch Selby, Program Manager of Shopify’s sustainability fund, an early investor in carbon removal credits, also shared his perspective on how to get involved in this nascent market. Both, he and Marty, agreed that there is an ongoing shortage of carbon removal credits and that getting involved today will be crucial in ensuring supply is available when companies begin using them as they approach their 2030 climate targets. Carbon removals are quickly becoming the most dynamic and exciting segment of the voluntary carbon markets and will be an area to watch in 2024.


The Carbon Markets Respond – Enhancing Credibility

Executives like Lisa DeMarco, CEO of Resilient LLP, highlighted the many positive initiatives supporting the increase in credibility of the voluntary market, including the Integrity Council for the Voluntary Carbon Market (ICVCM) on the supply side and Voluntary Carbon Markets Integrity Initiative (VCMI) on the demand side.

Conference presenters also reminded the audience that a tonne of carbon is a tonne of carbon: corporations need to ensure that the projects they support ultimately avoid or remove emissions, that the impact would not have happened without the financial signal from the carbon credit, and that it is a permanent action. Regarding the question of whether to support removal or avoidance projects, the recommendation was to apply a portfolio approach, as both types of credits are needed. This can be the most cost effective and impactful way to allocate a carbon budget, experts said.

Katie Sullivan, Managing Director of the International Emissions Trading Association (IETA), highlighted a key initiative to enhance transparency in the carbon markets, the Climate Action Data (CAD) Trust. IETA co-founded CAD Trust with the World Bank and the Government of Singapore. It is a global platform that links, aggregates and harmonizes all carbon credit data from project registries to facilitate transparent accounting. Its open-source metadata system creates a decentralized record of carbon market activity to avoid double counting, increase trust in carbon credit data and build confidence in carbon markets.

While 2023 was the year of increased scrutiny, 2024 is shaping up to be the year of enhanced credibility, standards, and hopefully, confidence.


As Marty Reid said: “Don’t get distracted by the noise.”

To help navigate the rapidly evolving carbon markets, RBC Capital Markets offers extensive expertise and full capabilities in emissions trading across both compliance and voluntary carbon markets. Established in 2008, RBC’s Environmental Commodities desk was the first among Canadian banks to be involved in emissions trading. Our desk consists of experts with deep knowledge of the markets, as well as regulatory frameworks for voluntary and compliance markets.

Building on the longstanding leadership of our desk, in April 2023, RBC announced a strategic investment and partnership with ClearBlue Markets and the establishment of the RBC Capital Markets Environmental Markets Solutions Group to offer bespoke solutions to clients looking to operationalize their net-zero targets through carbon and renewable energy solutions.

Our Experts

Brian Hong
Brian Hong
Vice President, Environmental Markets Solutions Group
Julia-Maria Becker
Julia-Maria Becker
Vice President, Environmental Markets Solutions Group

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