Jonathan Minnis | Spring 2025
Few subjects have been given as much attention as the topic of Climate Change, in both scientific and colloquial discourse. Increasingly, climate change has become a definitive topic of the business world, as waves of climate regulatory policy and capitalist pushbacks have slowly but surely changed industrial practices, consumer choices, career moves and business postures.
Of course, the climate-aware industry has been on the scene en masse since the marketing world grasped the potential of “greenwashing” their products. For years, customers have been hoodwinked with appeals to their climate ethos and varying degrees of effort to decarbonize the supply chain. Though savvy consumers have caught on, the court of public opinion is not the only threat to businesses with respect to their environmental impact.
Legislative efforts and regulatory agencies have made attempts to modernize and refine the process of requiring not only baseline emissions standards but climate-related transparency throughout industry. Various methods of government intervention have had mixed success in cutting down on greenhouse gas emissions (GHGs). Blame shifting and deferring responsibility can get in the way of writing effective policy. Debate concerning who should answer for the disparate harms of cumulative and projected GHG emissions has been nuanced.
Particularly for disasters of the environmental variety, reactive policy generally doesn’t work well. Progressive approaches to governance of GHGs haven’t always performed well either. Several “carbon tax” bills have reached Congress, all with dead-on-arrival status. Acting PM of Canada Mark Carney recently axed the 2019 Fuel Charge launched by his former party leader, citing the divisive unpopularity of the consumer carbon tax (Major 2025). Some European countries do levy hefty carbon taxes, but the plurality of carbon pricing is determined on exchange platforms that trade carbon offsets.
Distinct from a carbon tax, a carbon offset (CO) is a contract that establishes a parity between carbon emissions and carbon recapture or sequestration. These two parties, referred to as the carbon emitter and carbon sink, employ one another to buy and sell a legal claim to GHGs. These “verified carbon units” (VCUs) can be thought of as a commodified negative GHG balance that the owner can expend for operational compliance or hold to sell.
There are several types of clearinghouses for CO contracts, including Emissions Trading Systems (ETS), Output Based Pricing Systems (OBPS), and Cap-and-Trade (CaT). These markets have successfully launched in China, North America, the EU, Singapore, and recently Indonesia (Panggabean 2023). The concept of utilizing the existing financial markets to incentivize an efficient lower carbon economy is where COs show promise, though the pragmatics are hotly debated.
In 2024, an SEC final ruling, The Enhancement and Standardization of Climate-Related Disclosures for Investors, seems to have caught on to the need for businesses to blunt their climate reporting, mentioning “greenwashing” more than 20 times. The ruling elaborates, referring to the “boilerplate” disclosures that followed the Commissions’ 2010 Guidance, the previous guidelines for publicizing climate related information.
The ruling focuses on larger companies; the lower bound for public companies subjected to the SEC disclosure requirements is a $75 million market cap, with additional exemptions for emerging growth companies (EGCs) and smaller reporting companies (SRCs), (CLEAResult 2024, SEC 2024).
The Commission spells out new expectations for tidy and consistent placement of GHG- and CO-related information in business reports. Section II.G stipulates what companies must report about their GHG goals and targets, and requires financial disclosures for instances where carbon offsets or renewable energy credits (RECs) are an integral part of a business’ strategy. Applicants— the favorite SEC term for public firms— must divulge a range of qualitative and quantitative information about the source and authenticity of their offsets, and list other costs associated with their GHG emission goals.
These changes will plug holes in future audit trails and provide investors with a means of inspecting the connections between CO markets and modern industry.
Some dissenters to the ruling, notably the attorneys general of oil-producing states such as Texas and Alaska, have asserted that the SEC lacks the authority to impose these measures, though legal challenges to the ruling haven’t yet fomented. Opponents of the changes complain about the administrative costs and informational bloat that will result from the overly prescriptive rules. They say that the voluntary reporting and adherence to the 2010 Guidelines is sufficient to inform investors.
Many agree, however, that the proposed adoption of standardized disclosures would tamp down the ornamental “greenwashing” and that increasing data transparency will promote good investments (SEC 2024).
Apparently, the final rules are reaching the economy at a critical time. The volume of CO trading is growing at an accelerating pace, pulled by expanding energy production and pushed by state regulations. Global volume of CO trades reached $7 billion in 2024 and is projected to triple to more than $21 billion by 2029 (Technavio 2024, p.46). The bulk of carbon offsets are generated by a few large providers of carbon capture and storage (CCS). Firms in the CCS business can be third-party or often a segment of an energy company depending on the methods used and the storage destination, among other factors (Technavio 2024, p.75).
Looking at the global CO markets, there is a good reason to expect the continued exertion of corporate capital and market power to coax forth a better outcome for the planet’s people and resources. Consider the analogy that corporations are like agents and are capable of acts of self-preservation: Assume that anthropogenic GHGs heighten risk, increase costs, and decrease consumption. These consequences do not align with fundamental corporate interests and are existential in the long-run. Therefore such corporate agents ought to react in the present to ensure their survival.
Though there are collective action problems at the core of this thought experiment, the incentive to participate in conservation and climate protection is backed by the renewed authority of the SEC. This motivates not just R&D spending but innovative climate mitigation, an effect sometimes referred to as the Porter hypothesis that has been studied for decades.
Empirical research has demonstrated that CO markets reinforce the Porter hypothesis. A study conducted at the Changsha University of Science and Technology, Changsha China, examined how the implementation of the nation’s emissions trading system (ETS) affected the behavior of businesses. The study aimed to, “evaluate the impact of the pilot ETS on enterprise technological innovation.”
Using regression models, the study compared regulated and non regulated firms and controlled the data to measure among industry counterparts. The researchers performed a DiD (difference in differences) policy evaluation and extrapolated the effects of the availability of CO trades on corporate innovation. The tested hypotheses considered the regulatory pressure on industry segments in connection with CO price data.
Their research suggests that, after the pilot ETS implementation in 2014, research spending and patent volume of regulated firms increased by 1.4 and 2.8 times respectively, after several years of trading (Zhu, Long, Gong).
With the SEC changes coming into effect alongside existing GHG emissions standards, the increased volume of CO trade from within the U.S. could nudge things in the right direction and reward the companies best fit to be at the helm of the ensuing energy transition. What remains to be seen is what effects the international carbon market will have on currency exchange rates.
For the contemporary 99%, a top-down approach to integrating the true cost of fossil fuels seems to do the least financial harm.
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Chen et. al. 2018. “Source Partitioning of Methane Emissions and its Seasonality in the U.S. Midwest.” J Geophys Res Biogeosci. Vol 123, Issue 2. Feburary 19, 2021. https://doi.org/10.1002/2017JG004356.
CLEAResult. 2024. “What companies need to know about the SEC’s final rule on climate disclosures.” April 18, 2024. https://www.clearesult.com/insights/what-companies-need-to-know-about-the-SEC-final-rule-on-climate-disclosures
EPA. 2024. “What is Emissions Trading?” Last modified November 22. https://www.epa.gov/emissions-trading/what-emissions-trading
Major, Darren. 2025. “Carney Kills Consumer Carbon Tax in First Move as Prime Minister.” CBC News. March 14, 2025. https://www.cbc.ca/news/politics/mark-carney-drops-carbon-tax-1.7484290
Martinez, Srinivas, Gregorie. 2023. “The World Needs Carbon Markets.” 22 September, 2023. https://www2.deloitte.com/us/en/insights/industry/financial-services/future-of-carbon-market.html
Our World in Data. 2025. “Emissions Weighted Carbon Price.” Our World in Data. Accessed April 1, 2025. https://ourworldindata.org/grapher/emissions-weighted-carbon-price.
Panggabean et. al. 2023. “Indonesia Launched it’s First Carbon Exchange Market.” October 2023. https://www.nortonrosefulbright.com/en/knowledge/publications/9dfe6033/indonesia-launched-its-first-carbon-exchange-market
SEC. 2024. “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” Securities and Exchange Comission. March 6, 2024. https://www.sec.gov/files/rules/final/2024/33-11275.pdf
Technovio. 2024. “Global Carbon Capture and Storage (CCS) Market 2025-2029.” https://insights-technavio-com.ezproxy.library.wisc.edu/index.php?route=product/product&product_id=217684.
Verity, Radcliffe. 2024. “ACX to Close Abu Dhabi Carbon Exchange After One Year.” Bloomberg media. Oct 11, 2024. https://www.bloomberg.com/news/articles/2024-10-11/acx-to-close-abu-dhabi-carbon-exchange-operations-after-one-year?leadSource=uverify%20wall&embedded-checkout=true
World Bank. 2025. “Price of Carbon Around the World 2024.” 2025. World Bank Group. https://carbonpricingdashboard.worldbank.org/compliance/price
Zhu, Long, Gong. 2022. “Emissions Trading System, Carbon Market Efficiency, and Corporate Innovations.” Int. J. Environ. Res. Public Health. 2022, 19, 9683. https://doi.org/10.3390/ijerph19159683