Commission President Ursula von der Leyen recently spearheaded a high-level gathering at COP28 to advocate for the advancement of carbon pricing and carbon markets as pivotal tools in achieving the Paris Agreement objectives. This initiative further amplifies the Call to Action for Paris-aligned Carbon Markets, initially launched in June 2023 by the European Commission, Spain, and France.
In her address, President Ursula von der Leyen emphasized the significance of carbon pricing as the cornerstone of the European Green Deal. The European Union’s actionable approach mandates accountability for pollution, compelling a price payment, thereby motivating innovation and investment in environmentally-friendly technologies. Demonstrating its effectiveness, the EU Emissions Trading System (ETS) has successfully reduced emissions in its covered sectors by over 37% since its establishment in 2005, and accrued substantial revenue of more than €175 billion. This track record has inspired a global adoption of carbon pricing, evident in the existence of 73 instruments worldwide, covering a quarter of total global emissions.
The high-profile event witnessed participation from distinguished figures such as World Bank President Ajay Banga, World Trade Organization Director General Dr. Ngozi Okonjo-Iweala, and International Monetary Fund Managing Director Kristalina Georgieva. Their collective engagement indicated a new phase of cooperation towards enhancing carbon pricing. Additionally, Prime Minister of Spain, Pedro Sanchez, and President of Zambia, Hakainde Hichilema, provided insights from their respective countries, shedding light on the challenges and benefits associated with further fostering carbon pricing and guaranteeing the integrity of international carbon markets.
The European Commission’s commitment extends to offering technical support to countries seeking to integrate carbon pricing regulations into their domestic legislation. Furthermore, they are dedicated to assisting these nations in devising robust strategies for international carbon markets, aligning with their long-term climate and development goals. It was underscored that carbon credits need to adhere to common and rigorous standards, ensuring transparent and verified projects that effectively minimize emissions.
Carbon pricing stands as a critical component of the EU’s formidable and ambitious climate policies, enacted through the EU ETS. By imposing a fee on greenhouse gas emissions, this approach offers an equitable and economically efficient strategy for their reduction. Notably, it has resulted in a 37% decrease in emissions within the EU ETS-covered sectors since 2005, with revenues exceeding €175 billion. The EU has managed to decrease total emissions by 32.5% since 1990, while fostering economic growth of around 65%, clearly illustrating their successful decoupling of economic advancement from emissions.
An essential milestone in this endeavor was the launch of the Call to Action on Paris-aligned Carbon Markets in June 2023, bolstered by the support of 31 countries. This initiative encompasses commitments to expand and deepen domestic carbon pricing and carbon market instruments, extend support to host countries for the full implementation of agreed rulebooks for international compliance markets, and ensure the high integrity of voluntary carbon markets. It effectively builds upon existing initiatives such as Canada’s Global Carbon Pricing Challenge and the G7 High Integrity Principles, reiterating a collective commitment to realize the goals of the Paris Agreement.
As we move forward, COP28 is expected to play a pivotal role in setting benchmarks for international and voluntary carbon markets. The focus will center on ensuring their added value and reliability, while fostering equitable sharing of benefits among participants. The objective remains steadfast in establishing a credible standard that drives transformational investment, respects environmental limits, and averts reliance on unsustainable emission levels or unjustifiable dependence on vulnerable removals.
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