Carbon pricing mechanisms have long been considered an effective way to galvanise clean technology adoption and global emissions reductions, yet current schemes have been lacklustre. The imminent COP26 conference in Glasgow could change this.
In 2005, the European Union (EU) established the world’s first international emissions trading system (ETS). Since then, similar mechanisms have proliferated, and today the World Bank records 64 carbon pricing arrangements in operation, up by six from the previous year. Most significantly, this year China launched its domestic ETS, which covers 30 per cent of its national greenhouse gas (GHG) emissions and is the world’s largest.
Under Article 6 of the Paris Climate Change Agreement, brokered in 2015, leaders are tasked with negotiating a framework from which these domestic carbon markets could be connected to each other to, in effect, create the foundations for a global emissions trading system. In theory, this...