In December 2017, the One Planet Summit, convened by French President Emmanuel Macron, delivered several announcements related to carbon pricing and markets.
China's announcement on a national carbon market took the center stage.
Other major commitments included a new regional collaboration on carbon pricing in the Americas and pledge by five European ministers to pursue a meaningful carbon price.
8 January 2018: Over the month of December 2017, carbon pricing and market news was dominated by the launch of China’s national carbon trading system, which was first announced at the Paris One Planet Summit by Chinese Vice-Premier Ma Kai.
The One Planet Summit, convened by French President Emmanuel Macron on 12 December 2017, in Paris, France, to mark the second anniversary of the Paris Agreement and raise ambition, delivered several announcements related to carbon pricing and markets. These included:
- An announcement by China on the launch of its national cap-and-trade carbon market;
- The launch of a regional collaboration on carbon pricing, titled the ‘Paris Declaration on Carbon Pricing in the Americas,’ among Canada, Chile, Colombia and Mexico and the states of California (US), Washington (US), Alberta (Canada), British Columbia (Canada), Nova Scotia (Canada), Ontario (Canada) and Québec (Canada);
- A call by the Carbon Pricing Leadership Coalition (CPLC) for a carbon price in line with the objectives of the Paris Agreement; and
- A call by the environment and climate ministers of France, Germany, the Netherlands, Sweden and the UK for “additional reforms at the European level to encourage investors and businesses to develop economic models compatible with a scenario limiting global warming to 2°C” and a commitment to examining or implementing a meaningful carbon price in relevant sectors. [SDG Knowledge Hub Story on One Planet Summit] [One Planet Summit Commitments]
Commenting on the launch of the Chinese carbon market, which took place on 19 December, the International Carbon Action Partnership (ICAP) reported that the “Chinese market now overtakes the European Union [emissions trading scheme, ETS] as the world’s largest carbon market,” despite covering initially only the power and heating sector. In 2017-2019, the market will cover 1,700 companies that generate more than 3 billion tonnes of carbon dioxide equivalent, or approximately 30% of the country’s total emissions. The move was welcomed by both states and non-state actors. The EU Climate Action and Energy Commissioner Miguel Arias Cañete stated that the “announcement sends a very strong signal: the world is changing with new, broad climate leadership.” According to an EU statement, the Chinese ETS will help the country to mitigate emissions in a cost-effective manner. The statement also drew attention to a €10 million EU-China cooperation project that started in early December 2017 and will run for three years. Environmental group Carbon Market Watch announced that the world was moving “closer to global pollution pricing” and suggested the launch of the Chinese ETS sent an “important political signal of China’s commitment to address climate change.” [ICAP Story] [EU Press Release] [Carbon Market Watch Press Release]
Also at the One Planet Summit, 34 countries joined the ‘Tony de Brum Declaration,’ which calls for ambitious progress at the International Maritime Organization (IMO) to curb international maritime transport emissions. According to the Summit organizers, international maritime carbon dioxide emissions currently account for 3% of global emissions, but could rise by 250% by 2050 unless action is taken. According to a Carbon Pricing Leadership Coalition (CPLC) expert, more details of the IMO strategy to reduce greenhouse gas (GHG) emissions from 2023 are to be expected in April 2018 at the earliest. [One Planet Summit Commitments] [CPLC Blog Post]
In December 2017 ETS news, from ICAP:
- The Republic of Korea announced a cap for its ETS in 2018, which is 2.3% lower than the cap for 2017 [ICAP Story on Republic of Korea];
- The Canadian province of Ontario joined the California (US) and Québec (Canada) cap-and-trade programmes, forming the third largest carbon market in the world [ICAP Story on Ontario];
- Canadian provinces and territories were informed they will have until 1 September 2018 to detail their carbon pricing plans under the Pan-Canadian Framework on Clean Growth and Climate Change [ICAP Story on Canada]; and
- The US Regional Greenhouse Gas Initiative (RGGI) of nine states released an updated 2017 Model Rule, which includes a further reduction of the initiative’s emissions cap to 30% below 2020 levels, which is more than 65% lower than the RGGI’s cap set in 2009 [ICAP Story on RGGI].
In other December events, the CPLC reported on carbon pricing-related discussions at the International Finance Corporation (IFC) 2017 Clean Business Forum, which took place in New Delhi, India, in November 2017. CLPC announced that it will establish an Indian chapter to “help companies exchange knowledge and experiences in using internal carbon pricing, work more proactively with one another and engage with policy makers and other stakeholders to accelerate ambition and the transition to a lower-carbon future.” [CLPC Press Release]
The Asia Pacific Carbon Forum (APCF 2017), co-organized by the Asian Development Bank (ADB), International Emissions Trading Association (IETA), the Institute for Global Environmental Strategies (IGES) and the UN Framework Convention on Climate Change (UNFCCC), convened in Bangkok, Thailand, to discuss topics, including sectoral climate action, measurement reporting and verification (MRV) and updates on carbon markets. [APCF 2017 Webpage]
The World Bank’s Partnership for Market Readiness (PMR) released a technical note titled ‘Establishing Scaled-Up Crediting Program Baselines under the Paris Agreement: Issues and Options’ providing guidance and options for developing such baselines. The publication describes these baselines as “partly a technical, methodological challenge” but also as something affected by uncertainties arising from “unresolved questions regarding international rules under Article 6 of the Paris Agreement.” [PMR Publication]
Carbon Market Watch published a policy brief reacting to the revision of the EU ETS post-2020, agreed in November 2017. The brief, titled ‘Beyond the EU ETS: Strengthening Europe’s Carbon Market through National Action,’ argues that “putting the power and industry sectors on a low-carbon path […] requires complementary policies at the EU and national level.” The brief calls for the EU to “urgently adopt and implement a zero-carbon industrial strategy to bring Europe’s industry at the forefront of the global low-carbon transition” and for the next EU ETS review to increase the annual rate for lowering the cap. [Carbon Market Watch Publication]
A recap of 2017 by ICAP collated highlights in carbon market news, describing 2017 as “a milestone year for emissions trading.” [ICAP Press Release]
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The SDG Knowledge Hub publishes monthly climate finance updates, which largely focus on multilateral financing and cover, inter alia, mitigation and adaptation project financing news and lessons, institutional events and news, and latest developments in carbon markets and pricing. Past IISD climate finance updates can be found under the tags: Finance Update: Climate Change; and Finance Update: Sustainable Energy.