CO2 markets, taxes and quotas

27 sept 2012
10:20 – 10:40

CO2 markets, taxes and quotas

Placing a robust price on carbon emissions must be a central pillar of policies to mitigate climate change. However progress in achieving such a carbon price in the world’s major emitting economies has slowed in the wake of global economic difficulties. And the glacial pace of international negotiations has not helped either.

Nevertheless, there are signs of slow but steady progress for carbon pricing in different pockets of the globe. In Europe, political negotiations focusing on reforming the EU ETS – the world’s largest and most advanced carbon market – to deliver a stronger CO2 price signal are now expected to come to a head by year end. In Asia, China is in the process of developing “trial” carbon pricing mechanisms in 7 different provinces which are due to get under way starting in 2015. South Korea is also quickly developing a national carbon market to start in the next two years, while Australia and New Zealand have already begun pricing emissions. Meanwhile, in North America, California, the world’s seventh largest economy, and often a leader of U.S. environmental regulation, began a carbon market this year and several Canadian provinces now price carbon emissions.. Meanwhile some other developing countries, such as Brazil, South Africa and Chile are examining ways of introducing carbon pricing alongside other mitigation policies.

The near future for carbon prices will depend partly on economic recovery (especially in Europe) but also to a large extent on political leadership.  On the political front, it is critical that national leaders accept the reality that delay now merely adds to the cost of action later on and that there is never an easy time to undertake such reforms. If they do so, the near future for carbon prices and carbon pricing policies could suddenly look much brighter.