The global economy relies on sectors like electricity, industry, transportation, agriculture, and buildings, all of which contribute significantly to greenhouse gas (GHG) emissions. Governments regulate these emissions through compliance markets, while companies also engage in voluntary carbon markets to offset their carbon footprint. This research provides a focused analysis of key sectors based on their contribution to GHG emissions and their engagement in compliance and voluntary carbon markets, with real-world examples of carbon market engagement.
| Sector | Brief about the sector | Emissions % | Compliance Market Participation | Example of Compliance Participation from industries operating in sectors | Voluntary Carbon Market Participation | Example of Voluntary Market Participation from industries operating in sectors |
|---|---|---|---|---|---|---|
Electricity & Heat | This sector is a major contributor to GHG emissions, primarily from burning fossil fuels like coal, oil, and natural gas for power generation used by other end-use sectors (e.g. Industry) | 29.7 | China's National Cap-and-Trade: Focuses on the power sector. It follows a Tradable Performance Standard (TPS), allocating free allowances based on emissions intensity.
Regional Greenhouse Gas Initiative (RGGI) in the U.S.: It covers power plants over 25 MW, requiring them to buy allowances through auctions. The cap declines ~3% annually through 2030. | EON participates in the voluntary carbon market by purchasing carbon credits to offset emissions from its operations as part of its commitment to achieving net-zero emissions. | ||
Industry | Industries like cement, steel, chemicals, refineries and mining significantly contribute to GHG emissions, mainly from on-site fossil fuel combustion and chemical processes needed to convert raw materials into finished products. | 18.7 | EU ETS targets a 62% emission reduction by 2030. Exceeding allowances results in a €100 per excess tonne penalty.
California's Cap-and-Trade mandates major emitters to surrender four extra allowances per excess tonne of emissions. | ArcelorMittal one of the world's largest steel producers, & Cemex multinational building materials company, are involved in voluntary carbon markets by purchasing carbon credits. | ||
Agriculture | Agricultural GHG emissions come from livestock (e.g., cows), agricultural soils, and rice production | 14.4 | Denmark will impose a carbon tax on agricultural emissions starting in 2030, with a fee of 300 DKK (€40.13) per ton of CO₂, increasing to 750 DKK by 2035, making agriculture part of the compliance carbon market. | Nestlé purchases carbon credits from projects such as reforestation and renewable energy initiatives to offset emissions that are challenging to reduce directly within its operations and supply chain. | ||
Transportation | The primary source of emissions comes from burning fossil fuels for cars, trucks, ships, trains, and planes, most of which are petroleum-based, primarily gasoline and diesel, resulting in direct emissions. | 13.7 | Fuel Standards & Carbon Pricing – Governments enforce fuel efficiency standards and carbon pricing (e.g., fuel taxes and carbon fees of $130 per ton of CO₂ in Sweden)
CORSIA: Airlines must offset international flight emissions exceeding 2019 levels by purchasing carbon credits, with mandatory compliance from 2027. | British Airways invests in Sustainable Aviation Fuel (SAF), DAC, and Enhanced Rock Weathering (ERW) projects to reduce its carbon footprint | ||
Buildings: Commercial & Residential | Emissions arise from burning fossil fuels for heating, refrigeration, and waste management, along with electricity use for HVAC systems, lighting, and appliances in commercial and residential buildings | 10 | New York City (Local Law 97): Buildings over 25,000 sq. ft. must meet emissions intensity limits; exceeding limits face fines of $268 per excess ton of CO₂. Starting in 2025.
EU (Energy Performance of Buildings Directive - EPBD): By 2030, all new buildings must be nearly zero-energy, and existing ones must improve efficiency by 16% to 2020 levels. | City Developments Limited (CDL) acquired blue carbon credits and nature-based green carbon credits to offset its carbon emissions. |
These interconnected sectors require a collaborative approach to emission reduction. Through compliance measures, voluntary initiatives, and clean technologies, they can collectively drive the transition to a low-carbon economy.
