Half of the world calls for carbon markets to accelerate emissions reduction
Half of the countries that agreed to limit global warming to two degrees at COP21 in Paris thrown their weight behind calls for the development of international carbon markets - a move that could prove vital in reaching climate goals - according to new research.
The Emissions Trading Worldwide report from the International Carbon Action Partnership (ICAP) discovered that an increasing number of countries are trialling carbon markets which, if implemented correctly, could bring significant benefits to businesses and citizens.
“Now that countries have put forward their commitments and the international framework is in place, the focus is turning to domestic action,” said ICAP’s co-chair Jean-Yves Benoit. “Each country will need to decide on the best way to meet their target, and the next few years will see a proliferation of domestic climate measures, including those that put a price on emissions.
“Emissions Trading Systems (ETS) are already the central element of climate policy in a number of national and subnational jurisdictions and this number will grow further in the years to come.”
Carbon markets are essentually cap-and-trade systems that put annual limits on carbon emissions produced by companies. This economic system allows firms to trade permits in a central market – essentially allowing them to purchase credits if they ‘need’ to emit more pollutants from companies that haven’t used up all of their carbon allowance.
The ICAP report states that these systems are gaining traction internationally. To date, carbon markets cover just under 10% of global emissions - a proportion that ICAP believes will increase to 16% next year as the popularity grows. By 2017, carbon markets could cover up to half of the global GDP, ICAP says.
The biggest system of this kind is the European Union’s ETS which, at over a decade old, set nations a number of free allowances which nations can use. The system aims to gradually lower the number of permits that can be acquired.
The carbon market is continuing to grow in both North America and China. Just days before COP21, the Canadian provinces of Ontario, Quebec and Manitoba all agreed to interlink their carbon markets.
Meanwhile, China recently announced its intentions to launch a unified national carbon market by 2017 – which has seen a bilateral climate deal with US president Obama agreed.
While policymakers are growing increasingly interested in carbon markets, challenges still exist. Overestimations of the emission cap – usually due to economic, political and environmental clashes – and ineffectively high limits still need to be tackled, according ICAP.
The subject of carbon markets and carbon pricing was a contentious issue at the Paris climate talks. While countries were eager to explore implementations, it was ultimately left out of the agreement.
The new President of the UN climate change process, French Minister of the Environment, Energy and the Sea Ségolène Royal today met with soon to be ex-Executive Secretary Christiana Figueres to discuss the top priorities for the remainder of her presidency.
Figueres – who has herself called for the implementation of carbon pricing and markets – said that acceleration on climate coalitions, the strengthening on sustainable development worldwide and the swift ratification and implementation of the Paris agreement were her top priorities.
“We now have a concrete action agenda," Figueres said. "People all over the world want to do concrete things, immediately. The key is to accelerate the wonderful coalitions that we agreed on Paris and move forward with those."