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Survey finds fresh optimism for global carbon markets, but Paris Agreement’s ambition gap remains a concern

22 May 2018 11:03 AM | Anonymous member (Administrator)

FRANKFURT, 22 May - Respondents to IETA’s annual GHG Market Sentiment survey are optimistic about the prospects for emissions trading around the world, despite concerns about an ambition gap between current trends and the Paris Agreement’s 2°C goal. 

This year’s survey, conducted by PwC, yielded responses from 100+ IETA member representatives, from a variety of sectors and geographies. Responses showed an overall more positive sentiment towards emissions trading around the world, although an overwhelming majority caution that any shortcomings in the Chinese national ETS could have an impact on the mechanism’s reputation. 

And for the first time since 2011, price expectations for Phase III of the EU ETS broke above €10, with the average price in this year’s survey settling at €15.21 – almost double last year’s average. 

“The last 12 months brought a burst of energy to emissions trading around the world, from Latin America, across North American jurisdictions, and in China,” says IETA President and CEO Dirk Forrister. “Governments are getting serious about seizing the power of markets to achieve their climate goals.”

He adds: “However, slow progress at finalising the rules for the Paris Agreement, including on market mechanisms, risks delaying further action and ambition. During this year of focus on increasing climate ambition to ensure the ‘better than 2°C’ goal is met, we urge governments to deliver a good rulebook that can foster market cooperation and inspire more action on the ground.” 

Jonathan Grant, Director in PwC’s climate team, comments: “There is real momentum behind carbon markets around the world – price expectations are on the rise again.  And there are high stakes on the trading system in China.  Success there could inspire other countries to follow, but if it fails it could undermine action around the world.”

“Governments need to get real about their climate ambition and start implementing policy in line with the Paris Agreement.  According to IETA members, there’s a huge gap between current price expectations and what’s needed to achieve the two degrees goal.”

The survey report was released at Innovate4Climate in Frankfurt on Tuesday 22 May at 11am CET and will feature in a discussion at the event on Thursday 24 May at 9am CET. Hard copies will be available at the launch and it can also be downloaded from the IETA website.

NOTES

This year’s IETA survey was conducted among IETA members only, with more than one response per organisation possible, and open from 13 April to 1 May. We received responses from 119 IETA member representatives, from a broad range of locations and organisation types. Participants were given some freedom to select which sections and subject matter they answered on, and therefore a number of statistics are based on samples smaller than 119.

Key findings from this year’s survey

  • 71% of respondents believe that if China’s ETS is not considered a success by the global community, the reputation of emissions trading worldwide will be affected. A similar percentage of respondents believe the launch of China’s ETS will encourage other countries to implement a carbon price.
  • Expected prices for the EU ETS in Phases 3 and 4 have increased for the first time in three years – to €15 and €22 respectively. However, over 50% of respondents do not believe the EU ETS Phase 4 reforms are sufficient to meet the 2°C goal of the Paris Agreement. 72% of respondents now believe the UK will remain part of the EU ETS post-Brexit - double the amount compared to last year.
  • Governments worldwide need “to get real” if they are to raise global climate ambition. Respondents believe that a carbon price of €50/tCO2 by 2030 is needed to achieve the 2°C goal, which far outstrips their current price expectations.
  • 90% of respondents believe a cap-and-trade system will emerge within five years in Latin America. There are also high expectations for broader Pacific Rim carbon market cooperation in within the same timeframe.
  • Ontario has dominated the most important carbon market developments in Canada over the last year. Both the launch of its cap-and-trade system (and subsequent linking to the WCI) and the threat of its dismantlement in the upcoming provincial elections have grabbed people’s attention.
  • States are once more at the forefront of climate change action in the US: 97% of respondents believe state regulation will be important or very important in driving private sector climate action in the US (vs 54% for federal regulation).

Respondents are uncertain whether this year’s UN talks will successfully agree the rule book for the Paris Agreement or the status of the CDM after 2020. Furthermore, only 19% of respondents believe that developed countries will mobilise the promised $100 billion per annum of climate finance by 2020.

About IETA

IETA is the voice of business on carbon markets around the world. Established in 1999, IETA's members include global leaders in the electricity, oil/gas, cement, aluminium, chemical, mining, technology, standards, verification, broking, trading, legal, finance, accounting and consulting industries.

About PwC:

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. 

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