New carbon pricing initiatives to enhance development – Report

Over 40 national and 20 sub-national jurisdictions have either implemented or are considering mechanisms that can put a price on carbon, a new report  titled ‘Mapping Carbon Pricing Initiatives- developments and prospects has said.

From China to California, South Africa to Australia, new carbon pricing initiatives are emerging and this report outlines key developments and prospects of existing and new emission trading schemes and carbon taxes around the world.

The findings signal the importance that policy makers attach to putting a price on carbon to address climate change, a press release issued on May 29, 2013 has indicated.

According to Rachel Kyte, the World Bank Vice President for Sustainable Development, “Even as the first generation of the carbon market stutters, a robust price on carbon has never been more important if we are to avert dangerous climate change, adding that, “It is progress at the country level that gives hope – the innovation, energy and farsightedness among the people developing these national and sub-national systems that convinces us at the World Bank that carbon pricing is emerging and carbon markets have a future.”

While existing markets face structural issues, and slow economic recovery in Europe has dampened the world’s largest carbon market (the European emissions trading system), new pricing initiatives are developing faster than ever. They build on previous experiences and valuable lessons learned, developing a range of novel design features, such as pricing stabilization mechanisms, which intend to make them flexible and adjustable to new economic realities, the report says.

It said  these emerging pricing schemes can make an important dent in greenhouse gas emissions. Today, countries with implemented and scheduled carbon pricing mechanisms emit the equivalent of roughly 10 gigatons of carbon dioxide per year, equal to about 20% of global emissions.

Dr Niklas Höhne, Director of Energy and Climate Policy at Ecofys and lead author of the report said, “If China, Brazil, Chile, and the other emerging economies eyeing these mechanisms are included, carbon pricing initiatives could reach countries emitting 24 GtCO₂ e per year, or cover almost half of total greenhouse gas emissions. This would make an enormous difference and deserves our full attention.”

The report noted that, to gain efficiencies and benefits from larger markets, linkages and agreements are being put in place, such as the one between the EU ETS and Australia’s Carbon Pricing Mechanism and between the cap-and-trade programs of California and Quebec.

Also, there is a movement towards expanding the intended coverage of domestic pricing initiatives, with Australia and Korea already targeting 60% coverage, California aiming at 85%, and New Zealand at 100%, in the coming years.

By Dorcas Appiah