The EU is sharing its carbon pricing expertise globally via a new task force to assist other countries in developing and harmonizing their own carbon markets. This initiative supports global climate goals and addresses the increasing international focus on carbon pricing mechanisms, including the EU's Carbon Border Adjustment Mechanism. The EU aims to help accelerate global decarbonization efforts through responsible investment and sustainable finance.
Climate change is a global issue and requires a global solution - carbon pricing is being adopted worldwide to meet this challenge. The European Union is a pioneer in ambitious climate policies and has gained valuable experience through its initiatives. A part of this expertise will be shared globally by the EU Emissions Trading Scheme (EU ETS) diplomacy task force.
Effectively tackling climate change needs a global effort, a point that is often reminded at all the major environmental summits like the COP conferences. In response, many countries have implemented carbon pricing schemes, with 36 jurisdictions now having an ETS of their own and others, like Turkey and Brazil, developing theirs.
However, these global carbon pricing mechanisms still lag behind the scale and effectiveness of the EU ETS. In 2023, the total trading volume in all carbon markets was € 881 billion, with the EU ETS accounting for 87% of this amount. To match the EU ETS's impact, many enhancements and scaling up to global carbon pricing schemes are necessary.
The Carbon Border Adjustment Mechanism (CBAM) is a policy tool designed to prevent carbon leakage - it makes importers pay for the carbon emissions related to the products that are not produced in the EU. They have to either pay the equivalent of the EUA price (if there is no carbon pricing scheme in their jurisdiction), or pay the difference between the two carbon prices.
The CBAM sends a strong price signal to global economies to adopt domestic ETS and bring their own carbon prices as high as possible. This increases even more the need to learn from Europe's experience to build effective schemes. As the CBAM has provoked interest on the international stage, there are ongoing discussions in countries like China and the US about implementing similar mechanisms.
Established in 2005, the EU ETS is the world's oldest and largest cap-and-trade system, with a proven track record in reducing emissions. Over the years, it has evolved through several phases, incorporating all the lessons learned in real time. Its climate targets have been revised to become more ambitious, and it has been expanded to include more market participants. This experience allows countries outside the EU to make the most of those insights and accelerate their own carbon pricing efforts, given the urgency of the climate crisis. In response, in February 2024, the EU announced the formation of the Carbon Market Diplomacy Task Force, complementing its climate targets for 2040.
The several objectives of the EU ETS Diplomacy Task Force are:
Putting a high price on carbon is our best chance for achieving significant decarbonization. As this global challenge is increasingly addressed on an international scale, the EU ETS task force accelerates this process.
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