When will we see a global price for CO2?

Audio 01:59

Carbon markets force power stations, cement and steelmakers to compensate for their pollution by purchasing CO2 quotas which today cover 20% of the planet's emissions.

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By: Claire Fages Follow

5 mins

Five years after the Paris agreement on the climate, while the States formulate new commitments towards carbon neutrality on the eve of the UN “climate ambition” summit, we observe that carbon markets have multiplied.

But they are slow to impose a deterrent price on greenhouse gas emissions. 

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The carbon markets, which oblige power stations, cement and steelmakers to compensate for their pollution by purchasing CO2 quotas today cover 20% of the planet's emissions.

The World Bank counts 46 national and 32 regional.

From South Africa to Mexico, via Australia, New Zealand, South Korea, Kazakhstan, California or the American states of the east coast, they have spread from an initial model : the European system for the exchange of pollution permits, created in 2005.

China wants to extend it to the whole country

China, which until now only had localized carbon markets in large cities, has also just announced that it wants to extend them to the whole country in the next five years.

No less than 2,000 Chinese power plants would then be affected.

These quota trading markets are trying to correct the mistakes of the past.

Mistakes that plagued the European carbon market after the 2008 crisis. There were then so many excess CO2 allowances with the collapse of economic activity that the price of carbon had collapsed and there was no no more dissuasive for polluting companies.

Freezing of surpluses, reduction of free quotas

There is now a mechanism to be able to freeze quotas when there are too many, which recently raised the price of CO2 to 27 euros per tonne.

To achieve its goal of carbon neutrality in 2050, the European Union wants to go further: drastically reduce the share of free allowances that were distributed to certain companies to prevent them from fleeing Europe.

Instead, the European Union could introduce a carbon tax at its borders on imported polluting products.

Maritime transport soon included

The reform of the carbon market also plans to include new sectors, such as the transport of ships that frequent European ports.

A prospect that annoys the great maritime nations of Japan and South Korea.

We are still a long way from a convergence of all carbon markets, which would make it possible to achieve a global price for CO2.

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