Global Cooperation through Carbon Markets Could Cut Climate Mitigation Costs Dramatically

 

New modelling analysis undertaken for the report shows that increased international carbon trading could enable large-scale emissions reductions at much lower cost than at present, based on the carbon mitigation goals spelled out in countries’ national climate plans under the Paris Agreement - also known as the Nationally Determined Contributions (NDCs). By the middle of the century, an international market has the potential to reduce global mitigation costs by more than 50 percent. The goal of limiting emission reductions to meet a 2°C or lower target will be difficult to achieve cost-efficiently without more carbon trading.

 

The report indicates that financial flows of 2 - 5 per cent of gross domestic product (GDP) in countries with lower-cost mitigation activities could be realised for investments that will reduce emissions by 2050. In 2016, 40 national jurisdictions and over 20 cities, states, and regions are putting a price on carbon, including seven out of 10 of the world’s largest economies. The coverage of carbon pricing initiatives on global emissions has increased threefold over the past decade, translating to the equivalent of around 7 gigatons of carbon dioxide (GtCO2e), or about 13 per cent of global GHG emissions. In addition, governments raised about US$26 billion in revenues from carbon pricing initiatives in 2015. This represents a 60 per cent increase compared to the revenues raised in 2014.