New analysis finds more international carbon trading could drastically reduce costs of delivering deep emissions cuts
The cost of mitigating climate change could be reduced by almost a third by 2030 through greater cooperation via carbon trading, according to a new report released this week by World Bank.
The analysis, prepared with technical support from consultancies Ecofys and Vivid Economics, found an expanded international carbon market could enable large-scale emissions reductions at a far lower cost than is currently the case.
By 2050, the international market has the potential to reduce global mitigation costs by over a half, the report calculated.
It also argued it would be difficult for the world to hit a 2C or lower target cost-efficiently without a significant expansion of carbon trading schemes.
Over 100 countries considered carbon pricing schemes as part of their national climate pledges submitted ahead of the Paris summit, including emissions trading schemes that operate inside or across borders and direct carbon taxation policies.
The Paris deal also set up a framework for global carbon market cooperation, through which countries can pay to benefit from emission reductions in another country in order to fulfil its own carbon pledges.
The report found momentum on carbon pricing has continued to grow post-Paris, with 40 national jurisdictions – including seven of the world’s 10 largest economies – now putting a price on carbon, alongside over 20 cities, states, and regions.
In addition, governments raised around $26bn in revenues from carbon pricing initiatives around the world in 2015, a 60 per cent increase on the revenues raised in 2014, the report found, potentially providing an additional source pf capital for investment in low carbon infrastructure.
“The more we co-operate through carbon trading, the larger the savings and the greater the potential to increase ambition by countries in the short term,” said John Roome, senior director for climate change at the World Bank, in a statement. “To be effective, carbon pricing policies must be coordinated with other energy and environmental policies – this will require collaboration within and between countries.”
The report added that id the Chinese national Emissions Trading System is implemented next year as planned, 2017 would see the largest ever annual increase in the amount of global emissions covered by carbon pricing initatives.
The Chinese scheme is set to surpass the EU ETS to become the largest carbon pricing initiative in the world, with initial estimates showing it would result in the portion of global emissions covered by carbon pricing almost doubling from 13 per cent to between 20 and 25 per cent.
The World Bank report was launched at the international carbon conference held in Vietnam this week.
Advocates of carbon trading argue that it provides firms with an incentive to switch to clean technologies and ensures emissions reductions are delivered in the most cost effective way possible.
However, critics have long argued that many carbon trading schemes fail to set sufficiently high carbon prices and do not always deliver promised emissions reductions