Ambitious goals for emissions trading - ICAP Status Report 2024

The ICAP Status Report 2024 reveals that there are now 36 operational emissions trading systems worldwide, collectively covering 18% of global emissions. This expansion reflects a growing commitment to emissions trading, particularly evident in emerging economies.

As the world witnessed its warmest year on record, the need for swift and decisive action is more urgent than ever. Emissions trading emerges as a vital tool in the fight against climate change, as highlighted by the International Carbon Action Partnership's (ICAP) latest report.

ICAP is actively fostering international collaboration on emerging topics, such as aligning emissions trading systems (ETS) with net-zero goals and exploring design options to ensure competitiveness while preventing carbon leakage. Through these efforts, ICAP aims to significantly contribute to the effectiveness of emissions trading systems in advancing towards a net-zero future.

“Emissions trading is a proven policy tool which can cut emissions faster, and at a lower cost, than other options. The uptake of emissions trading captured by this year’s report is encouraging, as is the innovations and fresh thinking some jurisdictions are bringing to the table to make it work for their local circumstances,” says Stefano De Clara, head of the ICAP Secretariat. 

Emissions trading gains momentum across emerging economies 

The momentum behind emissions trading is unmistakable, particularly in emerging economies. With 36 operational systems globally and an additional 22 in various stages of development, emissions trading now covers 18% of global greenhouse gas emissions.

In Latin America, Brazil is advancing towards implementing an emissions trading system through a proposed draft law, while Argentina contemplates adopting a carbon market for its energy sector. In Mexico, a pilot program is underway and is anticipated to transition to full implementation by 2024. Chile and Colombia have gained experience from the implementation of carbon taxes and are now at different stages of considering and preparing for the implementation of an ETS.

In the Asia-Pacific region, India has outlined plans for establishing a carbon market framework, including both a compliance ETS and voluntary crediting activities. Indonesia has already launched an ETS covering the power generation sector, while Vietnam is preparing to launch a pilot ETS in the near future. Additionally, several other countries in the region, including Malaysia, Pakistan, the Philippines, and Thailand, are at various stages of considering or developing their own ETSs. Furthermore, Türkiye is gearing up to initiate a pilot ETS in 2024, highlighting the global momentum towards emissions trading.

Developed economies also show their commitment to emissions trading

Developed economies are also committed to emissions trading. For example, Canada is planning to introduce a federal cap-and-trade system tailored for the oil and gas industry, complementing existing pricing mechanisms. Meanwhile, the European Union is set to introduce a new ETS covering additional sectors such as buildings and road transport, alongside the existing EU ETS. This new system is slated to commence operations in 2027. Australia has revamped its climate policy framework, transitioning its safeguard mechanism into a baseline-and-credit system. Japan has launched the GX-ETS, a voluntary system expected to transition to a compliance ETS in the near future.

Compliance emissions markets driving climate action

In 2023, compliance markets raised a record breaking USD 74 billion, buoyed by higher prices in some systems – notably the EU and UK – as well as an increased use of auctioning to distribute allowances. These proceeds are often channeled into further initiatives to cut emissions, such as low-carbon technologies, research and development, or energy efficiency measures, while some jurisdictions also use them to support lower-income communities in reducing emissions. 

The ICAP Status Report 2024 paints a hopeful picture of global commitment to emissions trading, and momentum is unmistakably building. From emerging economies to developed nations, from Latin America to the Asia-Pacific region and beyond, countries are embracing emissions trading as a crucial instrument in the fight against climate change. 

You can access the full report here. 

About ICAP

Since 2014, the ICAP Status Report has been published annually by the Secretariat of the International Carbon Action Partnership in Berlin. ICAP connects regional, national and sub-national governments and agencies from around the world to discuss important aspects of ETS design, including through technical dialogues on technical aspects of ETS and knowledge sharing. Selected ICAP tools and research products are available on the ICAP website. ICAP also supports capacity building in countries that are considering or currently developing ETS implementation. 41 national and sub-national governments have joined ICAP since its founding in 2007. Since 2008, adelphi provides the staff for the ICAP Secretariat.

Contact: anastasia [dot] steinleinicapcarbonaction [dot] com (Anastasia Steinlein), Manager at adelphi and the International Carbon Action Partnership (ICAP)