The biggest challenge currently ahead of the world is managing a transition towards a low-carbon economy thereby not affecting the pace and diversity of economic growth. In response to the Paris agreement, (of decreasing carbon dioxide emissions by 55% by 2030 together with 2050 target of net zero emissions), reducing climate change and its impact to the various groups of populations together with ensuring sustained growth and development, various policy initiatives that guarantee reduced carbon emissions become imperative for many emerging economies (driven by and inclusive of SMEs) including South Africa. The carbon market emerged (from 2007 with multilateral development banks, Supranational and Agency as early issuers and later boosted by the private sector) as a sustainable way of enhancing green finance. This chapter aims to cover the carbon market participation and benefits, effectiveness, and coverage. The chapter methodologically leans on a comprehensive review of both theoretical [including the Cap-and Trade theory, Externalities theory, Pollution Haven Hypothesis (PHH), Jevons Paradox (JP) and Rebound effect (RE)] and empirical literature review as far as the carbon market/trading with respect to the participation/uptake, benefits, effectiveness, and coverage is concerned. Despite low prices of carbon/green bonds and growing participation, coverage is still low, especially to SMEs despite the need for them to also reduce their carbon footprints. The carbon market benefits include that it is an additional source of sustainable development finance, enabling and increasing longstanding green financial avenues; facilitates the “greening” of conventionally brown/carbon emitting sectors; and it promotes responsible and lasting investments through the availing of products that concurs/compatible with green finance. It also significantly promotes financial sector development. Despite the potential of carbon markets in reducing carbon emissions, it was revealed to be theoretically sound in the decarbonization of the world but practically ineffective due to very low carbon bond prices and greenwashing. Recommendations include capacity building on the developing countries’ financial markets to participate in green bonds and mediate through SMEs so that they can reduce their carbon footprints and help their contributions towards the medium-term and long-term sustainable development targets. Also, recommendations include increasing the carbon bond prices and penalties together with finding holistic approaches to ensure transparency and Sustainable Stock Exchanges (SSE).

Carbon Markets: Participation and Benefits

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发表日期：

2026年

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Simion Matsvai

摘要

The biggest challenge currently ahead of the world is managing a transition towards a low-carbon economy thereby not affecting the pace and diversity of economic growth. In response to the Paris agreement, (of decreasing carbon dioxide emissions by 55% by 2030 together with 2050 target of net zero emissions), reducing climate change and its impact to the various groups of populations together with ensuring sustained growth and development, various policy initiatives that guarantee reduced carbon emissions become imperative for many emerging economies (driven by and inclusive of SMEs) including South Africa. The carbon market emerged (from 2007 with multilateral development banks, Supranational and Agency as early issuers and later boosted by the private sector) as a sustainable way of enhancing green finance. This chapter aims to cover the carbon market participation and benefits, effectiveness, and coverage. The chapter methodologically leans on a comprehensive review of both theoretical [including the Cap-and Trade theory, Externalities theory, Pollution Haven Hypothesis (PHH), Jevons Paradox (JP) and Rebound effect (RE)] and empirical literature review as far as the carbon market/trading with respect to the participation/uptake, benefits, effectiveness, and coverage is concerned. Despite low prices of carbon/green bonds and growing participation, coverage is still low, especially to SMEs despite the need for them to also reduce their carbon footprints. The carbon market benefits include that it is an additional source of sustainable development finance, enabling and increasing longstanding green financial avenues; facilitates the “greening” of conventionally brown/carbon emitting sectors; and it promotes responsible and lasting investments through the availing of products that concurs/compatible with green finance. It also significantly promotes financial sector development. Despite the potential of carbon markets in reducing carbon emissions, it was revealed to be theoretically sound in the decarbonization of the world but practically ineffective due to very low carbon bond prices and greenwashing. Recommendations include capacity building on the developing countries’ financial markets to participate in green bonds and mediate through SMEs so that they can reduce their carbon footprints and help their contributions towards the medium-term and long-term sustainable development targets. Also, recommendations include increasing the carbon bond prices and penalties together with finding holistic approaches to ensure transparency and Sustainable Stock Exchanges (SSE).