Carbon Market Growth Crucial to More Ambitious National Climate Targets

The Carbon Market Institute (CMI) has released its first International Carbon Market Update for 2024, providing latest data and insights on global carbon pricing and policy, as well as the scale of investment driving billions towards decarbonisation. 

The report showed that 23% of global greenhouse gas emissions are now covered by carbon pricing, with these mechanisms jointly raising US$100 billion in 2022 alone. 

CMI Director, Climate Programs & Nature-based Solutions, Janet Hallows, said the growth of a high-integrity global market will have a crucial role to play, especially given the scale of finance currently being channelled into these solutions. 

“The new report shows that carbon markets are already driving large amounts of finance to decarbonisation efforts that would otherwise be underfunded, with strong demand for credits resulting in record retirements since Q4 2023.” 

“With countries due to submit their upgraded targets next year, there is significant potential here for carbon markets to bridge the sizeable gap in emissions reduction efforts required to get close to a 1.5 degree trajectory, however there is still work to be done to sure-up integrity measures and speed up international cooperation,” she said. 

It follows comments from UN climate change executive secretary Simon Stiell this month, stating that success in limiting temperature rise to no more than 1.5 degrees would depend on key countries, including Australia, adopting more ambitious approaches.  

Fair Price on Carbon

The economies named by Stiell cumulatively account for 80% of global greenhouse gas emissions, and the UNFCCC executive secretary said they should all have “seriously re-engineered” their emissions targets by 2025. 

In a speech delivered in Azerbaijan, which will host this year’s UN climate negotiations, Stiell also called for “a fair price on carbon – traded globally with integrity”, to further drive investment in renewables, and to super-charge innovation. 

The new CMI report notes that current pledges will still result in temperature rise of between 2.1 degrees and 2.8 degrees, and Connor said this would have disastrous consequences for people and the environment.  

Hallows added that it will also be crucial to finalise international carbon market rules at this year’s UN climate conference, so that high-integrity carbon credits can fulfil their potential to speed-up and scale-up global decarbonisation efforts. 

“These market rules were provided for in the Paris Agreement, but some key aspects – particularly regarding a centralised global market system – have not yet been locked in,” she said.   

“Finalising these rules will allow countries to be much more ambitious when they provide updates to their international climate commitments,” Hallows said. 

Key developments set out in the paper include:

  • Canada has released draft rules for a cap-and-trade scheme within the oil and gas industry, Brazil’s Lower House has endorsed a cap-and-trade bill, Turkey plans to launch an emissions trading scheme next year, and China’s voluntary carbon crediting scheme has been re-launched.  
  • A total of 78 bilateral agreements have been signed by various countries as a first step towards trading emissions reduction units in line with Article 6.2 of the Paris Agreement.  
  • EU arrangements to establish a voluntary certification scheme for carbon removals are likely to be finalised next month. 
  • Singapore’s carbon tax scheme now allows liable companies to use international carbon credits to offset up to 5% of their taxable emissions.  
  • Australia’s Clean Energy Regulator is working with the ASX to establish a national carbon exchange, and is establishing a new register for Australian Carbon Credit Units. 
  • The UK will introduce a Cross-Border Adjustment Mechanism by 2027.