In a resounding testament to the growing urgency of tackling climate change, the global carbon markets witnessed a remarkable surge in value, reaching an unprecedented US$949 billion in 2023.
This staggering figure, unveiled by analysts at LSEG (London Stock Exchange Group), marks a 2% increase from the previous year, underlining the escalating momentum towards carbon pricing as a key tool in combating greenhouse gas emissions.
The cornerstone of this surge lies in the proliferation of emissions trading systems (ETS) across various countries and regions. By putting a price on carbon dioxide (CO2) emissions, these systems aim to incentivize businesses to invest in low-carbon technologies and play their part in meeting ambitious climate targets.
This concerted effort has seen around 12.5 billion metric tons of carbon permits changing hands in the global emissions markets, a figure comparable to the previous year, but with record-breaking prices witnessed in key markets like Europe and North America.
Notably, the EU’s ETS emerged as the world’s most valuable carbon market, commanding around 87% of the global total with a worth of approximately 770 billion euros. Despite facing fluctuations, including a record high price of over 100 euros per ton in February, the EU ETS demonstrated resilience amidst challenges, such as weak demand from industrial sectors and the power industry, resulting in a slight downturn towards the end of 2023.
This downward trajectory continued into 2024, with prices dipping below 60 euros per ton, reflecting prevailing economic conditions and the resulting impact on demand.
UK’s ETS Experienced a Decline
Similarly, the UK’s ETS experienced a notable decline, with its value dropping by 22% to 36.4 billion euros in 2023. This decline was attributed to prices averaging around 65 euros per ton, a stark 34% decrease from the previous year’s average.
In contrast, North America witnessed record-high prices in its main compliance markets, with figures reaching $39 per ton in the Western Climate Initiative and over $15 per ton in the Regional Greenhouse Gas Initiative. Collectively, North American markets commanded a substantial worth of 71.4 billion euros, highlighting the region’s growing commitment to carbon pricing initiatives.
Meanwhile, China’s national ETS emerged as a significant player, with prices hitting a record high of 80.51 yuan (US$11.19) per ton in October 2023. Despite its relatively smaller market worth of 2.3 billion euros, China’s strides towards establishing a robust carbon trading system underscore its evolving role in global climate efforts.
The surge in global carbon market values not only reflects the increasing adoption of carbon pricing mechanisms but also emphasizes the growing consensus on the imperative to transition towards a low-carbon future.
As nations contend with the dual challenges of economic recovery and climate action, the role of carbon markets as vital instruments for achieving emission reduction goals becomes increasingly pronounced. Looking ahead, sustained efforts to bolster carbon pricing mechanisms, enhance market transparency, and foster international cooperation will be essential in catalyzing a transition towards a sustainable, climate-resilient future.
International carbon markets can play a key role in reducing global greenhouse gas emissions cost-effectively. The number of emissions trading systems around the world is increasing. Besides the EU emissions trading system (EU ETS), national or sub-national systems are already operating or under development in Canada, China, Japan, New Zealand, South Korea, Switzerland and the United States.
It can be recalled that in 2014-2017, the European Commission in close cooperation with China carried out a 3-year project to support the design and the implementation of emissions trading in China. The project provided technical assistance for capacity building and supported the seven regional pilot systems already set up and the establishment of a national emissions trading system.
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