Carbon Pricing and Markets Update: Initiatives Promote Carbon Pricing Approaches in Southern and Eastern
Around 20% of global emissions are covered by regional, national and subnational carbon pricing initiatives and less than 5% are priced at a level consistent with achieving global temperature goals, according to a World Bank report.
The ways in which carbon revenues are used is important for public and stakeholder acceptance of carbon pricing, according to UNEP.
A New Climate Institute report concludes that a climate levy would be the most suitable measure to help decarbonize the international maritime sector.
Traditional carbon pricing approaches may cause further economic difficulties in Eastern and Southern African countries, as the countries lack the regulatory frameworks and financial means to implement such approaches without external support.
19 August 2019: Carbon pricing measures, which play a critical role in climate action, can both stimulate economic growth and protect environmental health, and are increasingly being employed not only at the national level, but at the regional and subnational levels as well. Recent examples include initiatives in Eastern and Southern Africa and an expansion of options under the Tokyo Emissions Trading Scheme (ETS). A New Climate Institute report evaluates carbon pricing options for the international shipping sector. A number of recent studies discuss various uses of revenues gained from implementing carbon pricing measures.
This Update looks at these and other initiatives and reports on carbon pricing and markets that were launched over the course of the past few months.
*World Bank Report Analyzes 57 Carbon Pricing Initiatives*
The World Bank has published the ‘State and Trends of Carbon Pricing 2019
The report highlights new carbon pricing initiatives in the past year, mostly at the subnational level and in the Americas, including in Canadian provinces and territories, driven by Canada’s federal carbon pricing approach, and in Argentina, South Africa and Singapore. It also notes that Colombia, Mexico, the Netherlands, Senegal, Ukraine and Viet Nam are exploring new or complementary policies. In addition, for the first time, the 2019 report looks at the role of implicit carbon pricing, such as fuel taxes, to drive climate action. The report was launched in Singapore on 7 June 2019 at the Innovate4Climate
*UNFCCC Executive Secretary Highlights Critical Role of Carbon Pricing in Climate Action*
During an EU high-level conference on international carbon markets
*Carbon Pricing Approaches in Eastern and Southern Africa*
An East African Alliance on Carbon Markets and Climate Finance was launched during the Bonn Climate Change Conference in June 2019. The Alliance aims to: promote a common regional vision on carbon markets and climate finance; foster active and better coordinated participation of delegates from the region in UNFCCC negotiations on market mechanisms; and support readiness to implement Article 6. Several East African countries are already using market mechanisms to facilitate implementation of their Nationally Determined Contributions (NDCs) and aim to build on this experience for “accessing Article 6,” including transitioning Clean Development Mechanism (CDM) projects.
The Alliance is supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) Global Carbon Market Project in East Africa, with the UNFCCC Regional Collaboration Center Kampala. It was inspired by the West African Alliance on Carbon Markets and Climate Finance
A related UN Environment Programme (UNEP) report titled, ‘Carbon Pricing Approaches in Eastern and Southern Africa
– increase available financial resources to fund emission reduction projects; – increase domestic and international supply and demand for emissions reduction units; – enhance domestic legal frameworks to facilitate implementation and administration of carbon pricing mechanisms; and – build capacity to develop and implement domestic and regional-level carbon pricing.
The study will help interested donors make decisions to support implementation of carbon pricing instruments, in line with the countries’ needs and priorities towards achieving their NDCs and the SDGs. [Report Landing Page
*Subnational Efforts: Tokyo ETS Update*
Tokyo has finalized regulations for the third compliance period of its ETS from 2020-2024, including an expansion of options to reduce compliance obligations through low-carbon energy use. During this period, entities covered by Tokyo’s ETS will be required to reduce emissions by 25-27% below 2000 levels, up from 15-17% during the 2015-2019 period. Tokyo’s ETS involves mandatory participation of approximately 1,300 large-size facilities, which account for around 40% of the city’s industrial and commercial sector emissions, and collectively had already reduced emissions by 27% by March 2018.
Tokyo’s experience shows that simultaneously pursuing aggressive sustainability policies while maintaining a healthy economy is possible, and that national governments may be able to follow suit. The Tokyo ETS is already aligned with national goals, and the city has helped develop a national supplement to the carbon reporting platform that captures approximately 80% of Japan’s emission sources. In addition, Tokyo has signed an agreement with Saitama Prefecture that enables trading credits and could be used as a model for other Japanese cities. [NDC Partnership News Story
*Report **Outlines Carbon Pricing Options for Maritime Emissions*
Carbon markets are also being discussed at the sectoral level. To assist with this, the New Climate Institute has published a report titled, ‘Carbon Pricing Options for International Maritime Emissions
The report applies the criteria to the three options, and makes recommendations in order to contribute to IMO’s carbon pricing discussions. The report concludes that a climate levy would be the most suitable measure to help decarbonize the maritime sector as it would provide investors with more certainty, is dependent on prices and future trajectories, and could incentivize emission reductions in the sector. The paper notes that both an offsetting scheme and an ETS would result in higher transaction costs and administrative burdens. [Report Landing Page
*World Bank Technical Paper Details Options for Carbon Revenue Use*
The World Bank has published a paper providing guidance on ‘Using Carbon Revenues
The report explains that carbon revenues can, *inter alia*: help developing countries finance development objectives; be used to address the potentially negative impacts of carbon pricing on domestic industry competitiveness, reducing the risk of carbon leakage; and compensate individuals, households or businesses through direct transfers to help them deal with the negative impacts of carbon pricing. While individual countries tend to implement a combination of spending initiatives, the report notes, funding for climate and development projects has been the most widely adopted option based on reported revenue uses. [Technical Paper Landing Page