Richard Ginika Izuora
The intergovernmental forum International Carbon Action Partnership (ICAP), in a report released on Wednesday, disclosed that Emissions Trading Systems (ETS) raised a record $63 billion for governments last year, as the energy crisis pushed policymakers to double down on decarbonization efforts.
ETSs generally set the total amount of greenhouse gases that can be emitted by operators or sectors. The cap is gradually reduced so that total emissions drop. In jurisdictions with ETSs, operators buy or receive emission allowances, which can be traded as needed.
“ETSs are generating record level of revenues that can be used to both deliver further GHG reductions and to alleviate the burden on low-income communities and households, either directly via rebates or indirectly, such as funding energy efficiency improvements in state housing,” ICAP said.
Currently, there are 28 such systems operating around the world, and 21 at different stages of development and consideration, the report noted.
“As a result of higher allowance prices and an increasing use of auctioning, more than half of the total revenue raised by ETSs since 2008 was collected in 2021 and 2022, with many governments channeling these resources back into further climate action, subsidizing emerging technologies, or supporting lower-income households,” ICAP said.
“Emissions trading sends an important price signal to direct investment to decarbonization and can also, if designed well, ensure an inclusive and just transition by directing help to those communities which need it the most,” said Stefano De Clara, Head of the ICAP Secretariat.
In the EU, the biggest ETS market in the world, the allowance price averaged $83.10 per metric ton of carbon dioxide equivalent (CO2e) in 2022.
According to ICAP’s report, prices in the world’s emissions trading systems ended 2022 largely unchanged on the year.
Last year also saw three new ETSs come into effect, while an additional 20 ETSs are currently under development or consideration, particularly in Latin America and Asia. The year 2022 also saw the first concrete steps toward compliance emissions trading in Africa.