Regardless of the disappointment to institute an international climate change agreement through the United Nations, the World Bank sees individual carbon pricing initiatives developing faster than ever before and learning lessonsfrom the EU ETS. These new markets are taking shape at the same time as international carbon prices, CERs, are at their historic lows and the prospect of coordinated international emissions reduction measures uncertain.
“Even as the first generation of the carbon market stumbles…it is advancement at the country level that gives confidence,” says Ian Adlington, CEO, New Carbon Economics. “Carbon pricing is evolving and carbon markets have a future.”Multiple systems feature novel designs, like pricing stabilization making them flexible and adjustable to changing economic situations that may have been unforeseen when they were created. The current glut of allowances and low prices in the EU ETS has been attributed to system inflexibility to handle reduced allocation demand following the economic recession.
These emerging schemes could make a massive impact on global emissions. As of 2014, the countries with functioning systems or carbon pricing mechanisms scheduled to start within the next few years. The World Bank report highlights cap and trade systems in the EU, California, Kazakhstan, New Zealand, Quebec, the Regional Greenhouse Gas Initiative, and regional markets in Japan, as well as South Korea’s developing system. In addition, carbon taxes are cited in Australia, British Columbia, Denmark, Finland, Ireland, Norway, South Africa, Sweden, Switzerland, and the United Kingdom.
Even more promising, China’s new fledgling system has begun pilot programs nationally. “If China, Brazil, Chile, and the other developing economies adopt these new mechanisms, carbon pricing initiatives could cover a large portion of total global emissions,” – says Ian AdlingtonThe Bank analysts also note the growing trend of existing or scheduled systems expanding coverage of domestic emissions, with Australia and Korea now targeting 60% coverage, California eyeing 85% coverage, and New Zealand targeting 100% coverage within a few years.
“There may not be a one-size-fits-all,” – says Ian Adlington. “But it is clear the foundation of the first generation of market-based instruments is forming what will constitute the future landscape of carbon pricing and our new carbon economy.Ultimately, it all comes down to climate change, the ability to fund our transition to a sustainable future, and our inability to come to international agreement on climate policy.”Ian Adlington finally added “that climate change presents serious consequences to the economic outlook of the global economy, and the carbon emissions put us on the pathway to a devastating 3.5-4 degree Celsius temperature rise by 2100. Provided enough carbon pricing systems are operating or scheduled by the next United Nations climate meetings, the power of international carbon markets as an economic and planetary tool will be too tough to overlook.”
- PEFO gives updated carbon price outlook (news.theage.com.au)
- UK Seeks EU Draft Legislation on Carbon Market Fix by Year-End – Bloomberg (bloomberg.com)
- Business say they prefer carbon price over Direct Action (reneweconomy.com.au)
- 26 U.S. Economists Urge the President to Support the EU’s Emissions Scheme (theblaze.com)
- Tony Abbott’s claim households will be $550 a year better off without the carbon tax is outdated (abc.net.au)
- DECC seeks views on proposed EU ETS penalty changes (energylivenews.com)
- Coalition’s climate policy would cost vastly more than budgeted, study finds (theguardian.com)