This year’s edition marks the 10th anniversary of the International Carbon Action Partnership (ICAP) Status Report and provides a good opportunity to look back at developments in emissions trading systems (ETSs) over the last decade. Since the first Status Report, the number of ETSs in operation has more than doubled, growing from 13 to the current 28, and so too did the share of global emissions covered by an ETS, which jumped from 8% to 17%, following the increase from below 4 gigatons in 2014 to the current 9 gigatons.
Beyond the bare numbers, it is remarkable to look back and see what themes and developments characterized the first ICAP ETS Status Report in 2014. The report’s foreword opened by sorely noting that “despite years of international negotiations, a comprehensive global accord to halt climate change remains elusive”. In the report’s first signed article, EU policymakers reflected on the ongoing debate around backloading in the EU ETS, a measure aimed at mitigating overallocation in the system due to the global economic downturn that followed the 2008 financial crisis. Other articles focused on the lessons learned from the first few months of operation of the Shenzhen carbon market, China’s first pilot ETS, and on the experiences with the investment of auction proceeds in the Regional Greenhouse Gas Initiative (RGGI), which was the only ETS with extensive experience, given that auctioning in other systems was just beginning. The report was eagerly awaiting the operationalization of the ETS linkage between California and Quebec, with the first joint auction scheduled for later that year, and the launch of the Korean ETS in 2015.
Fast forward ten years and the Paris Agreement is in full force and a key driver for global climate action. The EU ETS, along with the other existing ETSs, has fully recovered from the effects of the 2008 financial crisis, weathered a global pandemic, and is proving resilient to an unprecedented global energy crisis. Building on the experience gained with the ETS pilots, China has launched a nation-wide ETS, which is now the world's largest such system. The use of auction revenues has become a key aspect in most mature systems, and it is especially useful in maintaining public support for carbon pricing, mitigating the effects of the energy crisis, and achieving additional co-benefits. The linkage between California and Quebec is now a prime example of successful cross-border linking and the Korean ETS, now in its third phase of operation, is a reference for other jurisdictions in Asia. And these are just some examples.
The last decade has not been smooth sailing. As the global economy slowly lifted itself out of the pandemic, war in Europe has triggered yet another series of tempests that have affected many countries across the world. The starkest of these is the ongoing energy crisis. It has not only laid bare severe energy dependencies but has once again served as a stress test for climate policies like emissions trading.
As governments and companies address these challenges both in the immediate and mid- to longer term, it is important to keep sight of ambitious climate targets and commitments to net zero by mid-century. At the same time, vulnerable segments of the population must be protected through supportive policies to ensure a socially just green transition. Emissions trading remains pivotal in this context and lies at the core of decarbonization strategies in an increasing number of jurisdictions.
This 10th edition of the ICAP Emissions Trading Worldwide report provides a comprehensive analysis of the latest developments and key trends in the ETS space from the past year. It includes a series of infographics that illustrate important ETS facts and figures, as well as detailed factsheets on all systems currently in force, under development, or under consideration.