Decarbonizing sectors through compliance and voluntary markets. Electricity, industry, agriculture, transportation, and buildings — these five sectors drive the majority of global greenhouse gas emissions. This research explores how each sector is participating in carbon markets — through evolving compliance frameworks and voluntary initiatives — to manage emissions and accelerate the transition to a low-carbon economy. While each sector’s pathway is unique, collective progress across sectors is key to achieving global climate goals.

Carbon markets enable the trade of carbon credits to offset emissions and are classified into compliance and voluntary markets. Compliance markets are government-regulated and mandatory for high-emission industries, using tools like cap-and-trade and carbon taxes. Voluntary markets are driven by corporate sustainability goals, with credits certified by independent standards like Verra and Gold Standard. Compliance markets grow through global climate regulations, while voluntary markets are fueled by net-zero pledges, ESG investor pressure, and consumer demand for sustainable products.

The global push for net-zero emissions is reshaping business. Germany leads with policy-driven change—carbon pricing under the Climate Action Programme, 80% renewable power by 2030 via the Renewable Energy Act, and €9 billion invested in green hydrogen. Circular economy laws target higher recycling, and ESG rules demand supply chain transparency. These measures raise costs and compliance needs but open access to clean energy, new markets, and investor trust. Germany shows how smart regulation can align climate goals with business strategy and drive sustainable growth in a low-carbon economy.

The Paris Agreement aims to limit global warming to below 2°C. We’ve already hit 1.36°C—and some months in 2024 exceeded 1.5°C. Beyond 2°C, climate risks rise sharply. Heatwaves, floods, droughts, and storms are disrupting operations—from flight cancellations at Delta to supply chain hits at Volkswagen, Nestlé, and Coca-Cola. Natural systems like forests and oceans, which help absorb carbon, may reach irreversible tipping points. Crossing 2°C means higher costs, supply shocks, and long-term business risk. Staying below is not just environmental—it’s economic.

The Kyoto Protocol (1997) set binding emission targets for developed nations but lacked global reach. Replaced by the Paris Agreement (2015), which involves all countries with voluntary, regularly updated climate goals (NDCs). Its aim: limit warming below 2°C, ideally 1.5°C. Progress is reviewed every five years via the Global Stocktake. Today, it is the central framework for global climate action.