Global Carbon Market Mechanisms


The following is an excerpt from a new CleanTechnica report, The carbon cure: Effective actions to fight climate change through carbon markets. To learn more about the types of carbon markets around the world and their role in stabilizing our climate, purchase the full report or become a CleanTechnica Member, Supporter, Technician or Ambassador.

Carbon market mechanisms exist at regional, national and sub-national scales. Since August 2020, 50 countries, 41 subnational jurisdictions, and 1 the region was designing or implementing different carbon pricing policies, such as emissions trading systems or carbon taxes. (See World Bank Update on Carbon Pricing Initiatives)

Who is leading the charge?

North America

Regional Greenhouse Gas Initiative (RGGI) was the first mandatory cap-and-trade program in the United States to limit carbon dioxide (CO2) from the electricity sector. Currently participating states are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York State, Rhode Island and Vermont. Learn more about RGGI here.

Western Climate Initiative (WCI) is an economy-wide cap and investment program currently linked between California and Quebec.

– The states of Washington, Nevada, Oregon, New Mexico, Colorado, Virginia, and Pennsylvania are considering various pricing mechanisms and policies.

– The state of California has long been a leading state on climate change, imposing some of the most ambitious reduction targets and toughest regulations. It is currently the only state with an economy-wide cap and investment program.

Transport and Climate Initiative (ICT) is a regional cap and investment program under consideration for transportation emissions in the Northeast and Central Atlantic. The program would require fuel distributors to purchase permits based on the consumption of their product in participating states, which would increase revenues for clean transportation investments.

The Climate Action Reserve is the premier carbon offset registry for the North American carbon market. The Reserve encourages actions aimed at reducing greenhouse gas (GHG) emissions through voluntary carbon offsetting.

Mexico has implemented a partial carbon tax since 2014 and launched a pilot Emissions Trading System (ETS) on January 1, 2020, promoting cost-effective emission reductions without harming the international competitiveness of the sectors covered. The pilot ETS covers the electricity, oil and gas and industrial sectors, which account for around 40% of the country’s GHG emissions. The government expects the emissions trading register and other elements of the ETS infrastructure to be ready within the next two years.

Canada has a federal carbon pollution pricing policy that leaves room for maneuver in each province, but imposes a guarantee price if local governments fail to meet federal standards of ambition. Quebec, Nova Scotia, the Northwest Territories, and British Columbia (more British Columbia Industrial Greenhouse Gas Emissions Reporting and Control Act (GGIRCA)) continue to meet federal benchmark stringency requirements. Provincial systems in place in Prince Edward Island, Alberta, and Saskatchewan also respect them for the emission sources they cover.

Europe and Latin America

EU Emissions Trading System (EU ETS) is a cornerstone of the EU’s policy to combat climate change and its key tool to reduce greenhouse gas emissions cost-effectively. It is the first major carbon market in the world and it remains the most important.

Carbon Offsetting and Reduction Program for International Aviation (CORSIA) – the International Civil Aviation Organization (ICAO) adopted a global carbon offsetting mechanism, CORSIA, to address GHG emissions from international aviation beyond the reductions to be achieved through progress in energy efficiency, technology and operations. and infrastructure. CORSIA aims to stabilize net GHG emissions from international civil aviation at 2020 levels and reduce net GHG emissions to half of what they were in 2005 by 2050.

– Costa Rica is a leader in carbon offsets and committed to carbon neutrality. In 2019, Costa Rica outlined its path to net zero emissions by 2050 in a new plan: the 2018-2050 National Decarbonization Plan, which includes strategies for all sectors of the economy, which, if they are implemented, will lead to further emission reductions.

Colombia has implemented a carbon tax in 2017 (Conservation Finance Network) and is considering an emissions trading system (ETS) aligned with climate goals and has the legal authority to do so in accordance with climate bill spent in July 2018.

Argentina implemented a Carbon tax in 2018, which will reach full strength in 2028.

Chile implemented a Carbon tax in 2017 and has a ETS under study with a view to establishing international links, potentially with the Western Climate Initiative (WCI). The government’s framework law on climate change would set a carbon neutral target for 2050, including provisions for a possible trading system.

Private and Non-Profit Groups – National and Global

Center for Climate and Energy Solutions (C2ES) leads a network of 7,000 members on carbon pricing. Its goal is to connect people across the United States to share successes, lessons learned and best practices, serving as a hub for carbon policy and climate solutions.

– Climate XChange’s National Climate Policy Network (SCPN) is a network of over 11,000 advocates, lawmakers and experts at the forefront of carbon pricing and climate ambition in their state. It is a platform for campaign leaders to connect and collaborate with each other, to exchange wisdom and resources.

– The World Bank Group works in key development areas to provide financial products and technical assistance, and help countries share and apply knowledge and innovative solutions to challenges. Launched in May 2017, their Carbon pricing dashboard is an interactive online platform that provides up-to-date information on existing and emerging carbon pricing initiatives around the world. It is based on the data and analyzes of the annual report Carbon Pricing Status and Trends Report Series.

Green for all: A national Dream Corps program that works at the intersection of environmental, economic and racial justice movements to advance solutions to poverty and pollution.

– Right-wing think tanks on carbon pricing: Street R; republicFr | EcoDroit House; Niskanen Center: Climate Archives.

Citizen’s Climate Lobby is an international grassroots environmental group that trains and supports volunteers to build relationships with their elected officials in order to influence climate policy.

Resources for the future is an American nonprofit organization that conducts independent research on environmental, energy and natural resources issues, primarily through economics and other social sciences.

South Pole is a global carbon market developer with a high level of technical expertise that works with private sector clients to reduce carbon emissions through offsets. The majority of projects and the market are a combination of large-scale renewable energy projects, reforestation and community projects as well as some industrial projects (eg wastewater treatment).

Notable trends, bright spots and resources

Aviation has one of the biggest impacts on carbon emissions, but is not always taken into account in carbon reduction policies (see CORSIA link above).

– Soil health is an indicator of soil carbon and its sequestration. See: “Healthy soils legislation update – May 2019. “

– Learn more about the state of voluntary carbon markets via MS State of voluntary carbon markets report.

CleanTechnica Carbon pricing article: Carbon pricing and the energy transition, by Brad Rouse (June 2020).

– Climate XChange’s Californian cap-and-trade report on health benefits and transportation investments.

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