Commission President Ursula von der Leyen today hosted a high-level event at COP28 to promote the development of carbon pricing and carbon markets, as powerful instruments to reach the Paris Agreement objectives. It builds on the Call to Action for Paris-aligned Carbon Markets that the European Commission, Spain and France launched in June 2023.
President of the European Commission, Ursula von der Leyen said today:
“Carbon pricing is the centrepiece of the European Green Deal. In the European Union, if you pollute, you have to pay a price for that. If you want to avoid paying that price, you innovate and invest in clean technologies. And it works. Since 2005, the EU ETS has reduced emissions in the sectors covered by over 37%, and raised more than €175 billion. Many countries around the world now embrace carbon pricing, with 73 instruments in place, covering a quarter of total global emissions. This is a good start, but we must go further and faster. The EU is ready to share its experience and help others in this noble task.”
The President of the World Bank Mr Ajay Banga, Director General of the World Trade Organisation Dr Ngozi Okonjo-Iweala, and the Managing Director of the International Monetary Fund, Ms Kristalina Georgieva all participated in today’s European Commission event, which marks a new phase in cooperation on carbon pricing. The four organisations all underlined the importance of carbon pricing for the climate and for a fair transition. Today’s event also included interventions from Prime Minister of Spain, Pedro Sanchez, and President of Zambia, Hakainde Hichilema, who shared their country’s perspective on the challenges and benefits of further developing carbon pricing and ensuring the high integrity of international carbon markets.
The Commission will continue to provide technical support to countries that wish to introduce carbon pricing regimes in their domestic legislation, and to help them to build robust approaches to international carbon markets that are consistent with their long-term climate and development strategies. Carbon credits must be based on common and robust standards that ensure an effective reduction of emissions through transparent and verified projects. Following today’s event, COP28 should play an important role in setting a benchmark for international and voluntary carbon markets that would ensure their added value and reliability while promoting an equitable sharing of the benefits between participants. We need a credible standard that drives transformational investment, respects environmental limits, and avoids lock-in to unsustainable levels of emissions or unjustified reliance on vulnerable removals.
Background
Carbon pricing is a central part of the EU’s successful and ambitious climate policies, implemented through the EU Emissions Trading System (EU ETS). Putting a price on greenhouse gas emissions is a fair and economically efficient way to reduce them, as it penalises polluters and incentivises investment in clean technologies. Carbon pricing also generates revenues for public sector invest in climate action. In sectors covered by the EU ETS, emissions have fallen by over 37% since its introduction in 2005 and revenues from the EU ETS have reached €175 billion. Since 1990 the EU’s total emissions have fallen by 32.5%, while our economy has grown by around 65%, underlining how we have decoupled economic growth from emissions. Emissions trading will soon apply to new sectors in Europe under recently agreed reforms, extending to maritime and aviation, and later to fuels for buildings and road transport.
The Call to Action on Paris-aligned Carbon Markets was launched at the Summit for a New Financial Pact hosted by France in June 2023. So far 31 countries (EU27 + Barbados, Canada, Cook Islands and Ethiopia) have expressed their support for the Call. The Call includes three elements: 1) commitment to expansion and deepening of domestic carbon pricing and carbon market instruments; 2) Support to host countries for full implementation of the agreed rulebook for international compliance markets, and; 3) ensuring high integrity in voluntary carbon markets. The Call builds on and compliments existing initiatives such as Canada’s Global Carbon Pricing Challenge, which the EU formally joined at the EU-Canada Summit on 24 November, the G7 High Integrity Principles, as well as the Paris Agreement’s Article 6 rules.
Related links
Speech of Presidentvon der Leyenat the High Level Event on Carbon markets
Quotes
Carbon pricing is the centrepiece of the European Green Deal. In the European Union, if you pollute, you have to pay a price for that. If you want to avoid paying that price, you innovate and invest in clean technologies. And it works. Since 2005, the EU ETS has reduced emissions in the sectors covered by over 37%, and raised more than €175 billion. Many countries around the world now embrace carbon pricing, with 73 instruments in place, covering a quarter of total global emissions. This is a good start, but we must go further and faster. The EU is ready to share its experience and help others in this noble task.
Source – EU Commission
COP28: Ursula von der Leyen on carbon markets
Brussels, 1 December 2023
Prime Minister, dear Pedro,
Mr President, what a pleasure to have you here,
Excellencies,
Ladies and Gentlemen,
Ministers, it is a pleasure to welcome all of you here in our pavilion,
We all know, if we want to keep global warming below the tipping point of 1.5 degrees, we need to cut global emissions. And there is a way to cut emissions while fostering innovation and growth. Put a price on carbon. It is a market-driven instrument. The message is very clear: You are polluting; you must pay a price. You want to avoid the payment; then innovate and decarbonise. Carbon pricing nudges the private sector towards innovation. It makes heavy polluters pay a fair price. And the revenues can be reinvested in the fight against climate change, in innovation and in a just transition. This is not only one of the most powerful tools in our hands, it is also one of the most trusted and the most tested. Governments in all continents have embarked on a similar journey.Countries like Zambia which are joining us today. But also many more, from Canada to China, from New Zealand to Kazakhstan.
What brings us here today is our resolve to boost a global movement. Last June in Paris, we launched a Call to Action to create more carbon markets that are aligned with the Paris Agreement. Today, we are joined by the IMF, World Bank and WTO. You have an essential role to play to support and incentivise change. Together we want to advance on three basic goals. First, we want to assist more and more countries to create and complete their domestic carbon markets. Worldwide, there are already 73 carbon pricing instruments in place. But they cover only 23% of global emissions. This share needs to increase. It will allow for a faster reduction of emissions. It will create a level playing field for international trade. And it will raise more revenues for global climate action, including in the developing world. Let us work on putting a price on all C02 emissions in the world.
Second, we need ambitious carbon markets. Carbon pricing must remove carbon. Let me give you some figures deducted from our own experience. In those 18 years, since the European Union introduced carbon pricing, emissions covered by our system went down by 40% while the economy was growing. And we have raised over EUR 175 billion in revenues. These revenues are going exclusively to climate action, innovation and to developing countries.
My third point, of course, voluntary carbon credits can also play a role. We need the private capital to flow into these carbon credits. But the investors also need certainty that these are effective projects. That is why we need common standards for projects that reduce emissions. We also need private money to flow into projects that enhance biodiversity. Zambia and Kenya, for example, have vast forests. They deserve to be rewarded for keeping them alive. That is of utmost importance. Here too, credits – let us call them nature credits – can play an important role.
COP28 is an essential moment to advance towards these three goals. Our aim is to establish the framework for international cooperation and to set a robust benchmark for carbon credit markets. We need diplomacy, to bring more countries on board. We need openness, to recognise that different countries may set up different kinds of carbon markets. And we need consistency, to make sure all efforts contribute to the fight against climate change. No country can do it alone, no institution can do it alone. Today, we are joining forces to bring all expertise to the table to give carbon pricing and carbon markets the push they deserve.
Many thanks.