Welcome to our monthly newsletter, Carbon Market News Roundup, the goal of which is to introduce our audience to a new asset class market in the making: the carbon market. Our previous issues, along with the rest of our commentaries, may be read here.
In the last issue, we focused on the hurdles and wild cards of the green transition, the effect of climate change on American home values, and a recent sign that the EU may be scaling back climate accounting rules. In this issue, we highlight the risks of climate change, including extreme weather, economic damage, and lives lost, as well as the uncertain outlook for American climate policy.
Risks of Climate Change
New German Government Report Highlights Growing Climate Security Risks
Bob Berwyn, Inside Climate News
Global warming streak brings extreme weather from cyclones to polar freeze
Attracta Mooney & Steven Bernard, The Financial Times
Climate change poses an increasingly dire risk to global stability, as highlighted by Germany’s release of its National Interdisciplinary Climate Risk Assessment. This comprehensive analysis underscores the profound security threats linked to climate change, including political instability, food and water scarcity, migration pressures, and the potential for conflicts over geoengineering strategies like solar radiation management.
Germany’s report aligns with its 2023 National Security Strategy, which prioritizes sustainability as a cornerstone of national and global resilience. It marks Germany as the second nation, after the United States, to conduct an interdisciplinary study addressing climate security risks. Foreign Minister Annalena Baerbock highlighted the growing toll of climate-induced extreme weather, with billions in economic damages and thousands of lives lost each year. These events, once considered rare, have become annual occurrences, destabilizing societies and driving migration.
The global picture reinforces these alarming trends. February 2025 ranked as the third-hottest February on record, with temperatures averaging 1.59°C above pre-industrial levels, signaling the intensifying effects of climate warming. Sea surface temperatures were the second-highest ever for the month, and sea ice coverage hit a record low. These changes indicate long-term, accelerating climate trends despite temporary cooling phases like La Niña. The persistence of high temperatures has amplified extreme weather events worldwide, from Japan experiencing its worst wildfires in decades to the southwestern United States, Mexico, and parts of the Arctic recording above-average temperatures.
Additionally, the polar vortex, a critical atmospheric pattern, is undergoing significant weakening, disrupting global weather systems. This disruption is expected to bring unusually frigid conditions across parts of North America and Europe while exacerbating winter storms. Such anomalies illustrate the interconnected and far-reaching impacts of climate change, as warming affects not only temperatures but also atmospheric and oceanic dynamics.
Despite these urgent signals, global climate policy remains fragmented. Germany’s proactive approach contrasts sharply with recent U.S. climate policy shifts. Under the Trump administration, several climate security initiatives have been reversed, including the revocation of Biden-era executive orders on climate resilience. These policy reversals have drawn criticism from climate experts, who view them as a missed opportunity to address bipartisan support for climate security. Erin Sikorski of The Center for Climate and Security described these reversals as a critical blind spot, while others emphasized the necessity of U.S. leadership in international climate efforts.
The consequences of inadequate action are becoming increasingly evident. Experts warn that the next four years will be crucial in preventing catastrophic climate tipping points. Failure to achieve rapid and substantial greenhouse gas reductions threatens to breach the goals of the Paris Agreement, setting off a cascade of devastating environmental and social crises. This includes the weaponization of climate issues in political discourse, leading to polarization and potential escalations in societal tensions.
The Outlook for American Climate Policy
Could Trump’s Favorite Word Double as Climate Policy?
Lili Pike, Foreign Policy
Tackling Climate Change in the Age of Trump
Richard Haass and Carolyn Kissane, Project Syndicate
The future of U.S. climate policy was thrown into question upon the reelection of President Donald Trump to the White House, given his past attitude towards policy designed to fight climate change. However, somewhat surprisingly, there may be room in the administration to still act: The Foreign Pollution Fee Act, spearheaded by Senators Bill Cassidy and Lindsey Graham, proposes imposing a carbon tariff on imported goods with higher carbon footprints than their U.S.-produced counterparts. This initiative targets six key industrial sectors: iron and steel, cement, aluminum, glass, fertilizer, and hydrogen, and introduces a baseline 15% tariff with additional charges based on carbon intensity relative to U.S. standards.
The proposal represents a shift in approach, framing climate action through the lens of trade and strategic competition rather than environmental regulation, something the Trump administration may be able to get behind. This framing aligns with broader efforts to enhance U.S. trade competitiveness, particularly against countries like China. Advocates argue that such a tariff could indirectly encourage global emissions reductions by incentivizing cleaner production practices.
Despite its potential benefits, the proposal still highlights a broader inconsistency in climate policies under the Trump administration. While the carbon tariff aligns with strategic goals, recent policies, such as a 25% steel and aluminum tariff that disregards carbon intensity, underscore a fragmented approach. Critics also emphasize the lack of complementary domestic climate policies. The freeze on funding from the Inflation Reduction Act has stalled essential industrial decarbonization projects, such as subsidies for transitioning from coal-fired blast furnaces to electric alternatives. Without robust domestic investments, the U.S. risks losing its “carbon advantage” over competitors, undermining the effectiveness of trade-based climate measures.
The proposal also reflects a broader shift in global climate efforts under the Trump administration, marked by a retreat from multilateral agreements and a prioritization of fossil fuel production. The U.S. has withdrawn from the Paris climate agreement, rescinded emissions-reduction targets, and expanded oil and gas production. These policies mirror trends in other nations where economic growth takes precedence over climate action. However, practical and politically feasible measures—such as promoting natural gas over coal, scaling renewables through public-private partnerships, and accelerating nuclear energy deployment—could offer pathways to mitigate climate change without sacrificing economic stability.
Experts believe that a balanced and pragmatic climate strategy could also include adaptation measures, such as updating building codes to enhance resilience against extreme weather, as well as fostering innovation in carbon capture and solar geoengineering technologies. Additionally, conservation efforts, particularly in forests and oceans, could play a crucial role in addressing long-term climate challenges while bolstering environmental credentials.
Other experts put an emphasis on “minilateralism,” where smaller groups of key governments and corporations focus on targeted solutions, choosing an alternative path forward. While halting climate change entirely may be unrealistic, coordinated efforts to manage its impacts remain essential for economic and environmental stability.
Recommended Reads
European glaciers have shrunk 40% since 2000, study says
What European Security Requires
Thailand soon to launch carbon tax, Malaysia to follow next year
