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Expert Warns That The Carbon Market Alone Does Not Accelerate Change; Economist Critiques The Energy Transition Without Robust State Planning.
Currently, the energy transition dominates the global agenda, especially in light of the growing concern about climate change and the environmental impacts of fossil fuel use.
However, not all experts agree with the methods adopted to accelerate this transformation. Recently, an economist criticized the energy transition driven by the carbon market, as he points out structural limitations that may compromise both the speed and effectiveness of the process.
Indeed, Professor Pedro Paulo Zahluth Bastos, from the Institute of Economics at Unicamp, emphasizes that while carbon markets exist to encourage companies to replace polluting energy sources with renewable alternatives, they cannot, by themselves, promote the necessary energy transition to address the climate crisis.
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Europe has never produced so much clean energy at the start of a year — 384.9 TWh of renewables in the first quarter of 2026 broke all records, and fossil generation fell to its lowest level.
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For the first time in history, solar and wind energy supplied more electricity than all global demand growth — and fossil generation fell to its lowest level in 100 years.
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Renewable energy surpasses coal for the first time and marks a historic turning point in the global electricity sector
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Climate change should be combated by solar and wind energy — but extreme heat reduces the efficiency of panels, violent winds shut down the turbines, and extreme rainfall floods entire power plants.
Therefore, for him, robust state planning is essential, as only then can the supply of green technologies and the adoption of sustainable alternatives by companies and consumers become viable.
Moreover, the idea of the carbon market emerged in the last 30 years as a tool within greenhouse gas mitigation policies, primarily coordinated by the United Nations (UN).
For example, international events such as the COP climate conferences, culminating in COP29 in Baku, Azerbaijan, consolidated the proposal to set emission quotas and create a system of tradable credits among companies.
However, Zahluth Bastos claims that the mechanism diverted attention from the problem more than it generated concrete solutions. He highlights that without technological infrastructure and access to renewable energy, the rising prices of carbon do not induce an efficient transition.
Additionally, he notes that reliance on market policies creates a false sense of progress. Thus, many governments and corporations lean on carbon credits as a primary solution, while concrete investments in clean technologies and transmission networks remain insufficient.
Economist Critiques The Energy Transition: Limitations of The Carbon Market
In this sense, the carbon market operates based on quotas for greenhouse gas emissions. Consequently, companies that emit less than allowed earn credits, which can be sold to those that exceed their targets.
Although economic theory suggests that this creates incentives to reduce emissions, in practice Zahluth Bastos warns that the system fails to establish a global carbon price.
Historically, global efforts such as the Kyoto Protocol, signed in 1997, sought to reduce reliance on fossil fuels and stimulate clean technologies.
However, between 1997 and 2024, fossil fuel consumption increased by about 58%, and the share of these fuels in the global energy matrix decreased only marginally, from 85.8% to 81%.
Therefore, these numbers show that policies based solely on the market have failed to generate a significant transformation.
In this context, the economist reinforces the need for direct government intervention, creating infrastructure and technological supply before relying on pricing mechanisms.
Furthermore, another point highlighted by the expert is the low profitability of renewable energy companies compared to traditional oil and gas sectors.
While the annual returns of green energies range between 6% and 8%, private banks seek to finance projects with returns above 10%, easily obtained in fossil fuel sectors, supported by oligopolies and cartels such as OPEC.
Thus, this discrepancy creates an economic barrier to the expansion of clean energies, regardless of carbon prices.
Moreover, Zahluth Bastos points out that misinformation and political pressure significantly influence the energy transition. Consequently, powerful corporations invest in lobbying and financing politicians who prioritize fossil interests, delaying clean energy incentive policies.
Structural Challenges of The Energy Transition
Indeed, Professor Zahluth emphasizes that even with increases in emission prices, companies will continue to consume fossil fuels.
This happens because alternative technologies are still not sufficiently accessible or competitive.
Additionally, the infrastructure needed for the energy transition, including transmission networks, energy storage, and distributed generation, still limits many countries.
Therefore, any rise in carbon prices only serves as a financial punishment, without inducing substantial changes in the energy matrix.
On the other hand, another relevant aspect highlighted by the economist is the unequal distribution of global emissions.
Until 2010, 90 institutions accounted for 63% of emissions, concentrated in temperate regions less affected by global warming. Between 2016 and 2022, only 57 corporations emitted 80% of global emissions.
Thus, this concentration shows that market-based policies relying on generalized incentives may be insufficient, reinforcing the need for targeted public policies.
Moreover, the carbon market faces challenges related to the production and storage of renewable energies.
Solar and wind energy generation, for example, requires large tracts of land, often far from urban centers and transmission networks.
Furthermore, energy storage is still costly and involves technical complexities, making it difficult to balance supply and demand without impacting prices.
Consequently, the volatility of financial returns in these sectors creates cycles of overproduction and profit decline, discouraging consistent investments.
Natural Limitations and Complementary Solutions
Historically, reforestation and environmental conservation efforts have helped reduce global warming.
Indeed, forests absorb carbon and can offset part of emissions, but Zahluth Bastos warns of land and capacity limitations.
Studies indicate that it would be possible to reforest, at most, 900 million hectares globally, which would absorb only five years of emissions at the current annual rate.
Therefore, natural solutions alone cannot replace structured policies and energy planning.
The economist reinforces that the carbon market and forest compensation only work when integrated into an alternative energy system planned by the state.
Moreover, the imposition of social costs and financial incentives, without technological infrastructure and clear public policies, does not guarantee a fair and rapid transition to clean energies.
Thus, he argues that the state must act before using the market as the primary tool for change.
Furthermore, Zahluth Bastos warns of the need for environmental education and public awareness, essential to enable changes in behavior regarding energy consumption and the adoption of clean technologies.
The energy transition does not depend solely on prices or economic incentives; it requires a cultural and social transformation, investment in information, technical training, and community support.
State Planning Is Essential
In summary, the economist’s article highlights that relying solely on the market to drive the energy transition is limited.
Recent history shows that without robust state action, dependence on economic incentives cannot address the global climate crisis.
Therefore, the message is clear: well-structured public policies, adequate technological infrastructure, and encouragement of investments in renewable energies are central to an effective, sustainable, and socially just energy transition.
Finally, the debate about the planet’s energy future continues, but Professor Zahluth’s analysis underscores that depending solely on the carbon market may delay rather than accelerate the transition.
Consequently, the integration of public policies, strategic planning, social awareness, and clean technologies will be essential for humanity to achieve emission reductions and mitigate the effects of climate change significantly and durably.
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