CLIMATE TRANSITION DYNAMICS AND CHALLENGES OF A NASCENT VOLUNTARY CARBON MARKET Market Demand for Carbon O昀昀sets Carbon o昀昀set demand has increased signi昀椀cantly in the past few years on the back of a rapid expansion in corporate sustainability commitments. However, compared to compliance markets, the voluntary market is still quite small, with current annual trading volumes amounting to around $1 billion1 compared to roughly $750 billion annually in the EU ETS2. Demand-Side Trends Supply-Side Trends: Obstacles for As corporates set net zero or carbon neutrality targets Growth and increase their sustainability commitments, the Carbon o昀昀sets supply remains fragmented due demand has increased for carbon o昀昀sets. to a wide range of project types and a number of independent standards and associated registries. Registries play an important role in the voluntary carbon market by dictating which methodologies are viable for assessing a carbon o昀昀set project, issuing the actual credits, and keeping track of credit ownership. 1—Ecosystem Marketplace: “State of the Voluntary Carbon Markets 2021,” September 2021. 2—Anders Nordeng, Re昀椀nitiv: “Carbon trading: exponential growth on record high,” February 2022. Our Involvement in Carbon Markets Advocacy Work actions, as well as a roadmap for implementing a high- Goldman Sachs served on a private sector-led task force quality, high-integrity voluntary carbon market at pace aimed at scaling global voluntary carbon markets to help and scale. meet the goals of the Paris Agreement. The Taskforce on Scaling Voluntary Carbon Markets — launched by Mark Looking Ahead: Additional Learnings from O昀昀set Carney, UN Special Envoy for Climate Action and 昀椀nance Sourcing Initiatives advisor to UK Prime Minister Boris Johnson for COP26 — is The availability of carbon o昀昀sets from certain projects, sponsored by the Institute of International Finance. particularly nature or technology projects that remove CO2, is limited. In response, Global Markets has issued requests The task force published its blueprint on creating a large- for removal project proposals that can address client scale, transparent carbon credit trading market in January interest in the market as well as meet the 昀椀rm’s own net zero 2021. The blueprint included 20 comprehensive and tangible objectives in o昀昀setting its operational emissions. Sustainability Report 2021 Climate Transition | Driving Transition 25