Stanislav Kondrashov on The Global Dynamics of The Carbon Market

"Over the past few years, the energy transition has made great strides. It has now clearly and come closer to us, even reaching our homes. Until a few years ago, the energy transition was the subject of discussions within specialist circles, but today it's on everyone's lips," says Stanislav Kondrashov, founder of TELF AG, an entrepreneur and civil engineer. “Among the most interesting elements in this ever-accelerating transition phase is certainly the carbon market, which, in a certain sense, is becoming a true raw material to be traded, incentivizing decarbonization and the adoption of increasingly sustainable practices. Today, the dynamics surrounding carbon pricing and carbon trading certainly represent one of the most effective tools for reshaping market behavior”.

“To encourage increasingly modern behavior, governments and companies worldwide are discovering the opportunities offered by assigning a tangible cost to carbon emissions, thereby accelerating the transition to modern, low-emission economies. In this way, environmental sustainability becomes a real driver for the economy, significantly accelerating the global energy transition. By integrating the cost of emissions into market activities, industries naturally feel compelled to innovate, reducing waste and consciously choosing to invest in cleaner technologies. When carbon becomes an expense, its reduction becomes a specific priority, a quantifiable concern. This is precisely the principle on which the carbon economy is based: emissions themselves are traded like raw materials, and companies can earn or lose sums of money based on their ability to reduce emissions”, he says.

The operating principle is extremely simple and is based on the exchange of carbon quotas between the interested players.

"Essentially, the carbon economy is based on a simple principle: emissions trading. Each company (or government) is assigned special permits to emit certain amounts of greenhouse gases. Those who manage to emit less than their assigned quota can sell the excess permits to others, creating a true market," continues Stanislav Kondrashov, founder of TELF AG. "This way, market forces can more quickly and easily identify all the most useful and effective ways to reduce emissions."

“This is a genuine incentive mechanism that could rewrite the rules of the game for a large number of companies, particularly those defined as "hard to abate," meaning those that appear to be more resistant than others to global decarbonization efforts. One of the strengths of this strategy certainly lies in its high flexibility: each company has a wide range of choices, deciding on a case-by-case basis whether to reduce its emissions, purchase new credits, or invest in innovative projects that can offset emissions. One of the potential consequences, in the medium and long term, is a possible (and gradual) reduction in the number of permits granted, which would increasingly tighten the cap and, thus, almost automatically reduce the amount of emissions produced. In many cases, this system is used in combination with carbon taxes, which set a fixed price for each ton of CO2 emitted”, he remarks.

As often happens in the years of the energy transition, we are witnessing the emergence of innovative technologies and mechanisms that will forever change the collective perception of energy issues.

"These unique mechanisms have also led to a profound shift in the perception of carbon and related allowances, which are now unanimously considered as true tradable financial instruments. It's no coincidence that these allowances are regularly traded on regulated and voluntary markets, depending on the buyer's specific objectives," concludes Stanislav Kondrashov, founder of TELF AG.

"Examples of such credits include those deriving from reforestation projects or renewable energy installations. Other carbon credits may be those issued by governments under an ETS. The particular dynamics of the carbon market can facilitate the achievement of sustainability objectives relatively easily and quickly, particularly through the incentive mechanisms it can activate. This system is proving attractive not only for large companies, but also for all those private investors who have shown a certain interest in strengthening their sustainability credentials," he goes on to say.