On Thursday, in a statement the Global Financial Markets Association (GFMA) said, countries should increase the use of carbon markets to meet goals set by the Paris climate agreement aimed at limiting a rise in the earth’s temperature to 1.5 degrees Celsius (2.7 Fahrenheit).
Global leaders are set to meet in Glasgow, Scotland, from this Sunday for a United Nations climate summit, and will negotiate to set rules on and procedures for carbon markets under the Paris accord.
“Just 20% of global greenhouse gas emissions (GHG) are covered by a regulated price, and the schemes that exist establish prices often too low to effect real change,” reads a report by the GFMA and Boston Consulting Group.
“Effective carbon pricing in the economy is one of the strongest tools to drive changed outcomes, treating GHG emissions as a time-limited resource,” said Steve Ashley, Chairman of GFMA and Head of Wholesale Division at Nomura.
A carbon emissions trading system (ETS) sets a cap on the amount of emissions that a sector, or an industry can produce. It also creates “carbon permits” for those emissions that companies can buy for each ton of carbon dioxide (CO2) emitted by them.
Currently, in existing schemes, the average cost of a ton of CO2 is less than $5, it will need to rise to $50-150 a ton by 2030 to meet the Paris goals, states the report.
Carbon prices in Europe’s ETS, the world’s most established scheme, trade around $69.83 (60 euros) a tonne, in contrast, China’s ETS, which launched earlier this year, prices carbon at around $6.73 (43 yuan).
The Global Financial Markets Association comprises financial industry trade groups in Europe, Asia and the United States.
($1 = 0.8593 euros)
($1 = 0.1566 Chinese yuan renminbi)