Abby L. Harvey
GHG Daily
2/1/2016
China has indicated to the European Union that in the future it could be open to merging with the EU carbon market, according to David King, U.K. special representative for climate change. “I’ve just come back from Beijing and it may be of interest that the Chinese government is interested in talking with the European Union about some way of shifting towards a united process between EU and China, which is clearly an objective that is needed in order to avoid multiple prices of carbon dioxide emerging,” King said during a presentation Friday at the International Energy Agency in Paris.
In late September, China unveiled plans to launch a national carbon cap-and-trade program by 2017. The Chinese market would be the largest in the world, eclipsing the EU market, which currently holds that title. The merger of the two markets could lead to the eventual formation of a single global market, King said. “If our two markets come together, and I believe that has got to be a realistic future, then that is going to pull in many other markets into play,” King said.
Other carbon markets operating now include the California carbon market, of which Quebec, Canada, is also a member, and the Regional Greenhouse Gas Initiative, which consists of nine northeastern states.
However, the motivation for nations to combine individual markets and ultimately form a global market is dependent on the successful operation of current markets, King said, which is why it is imperative that the kinks be worked out of the EU system. “[The EU carbon market] hasn’t been working too well and we need to get our house in order. We have a process, and I believe we are going to achieve that. But I would say by 2020 we will have stabilized the European carbon market at a relatively good price. That in itself is going to be an advertisement to the rest of the world that it can be achieved and that it can deliver,” King said.
The European Commission in July 2015 released its proposed revision of the Emissions Trading System (ETS), which is intended to deal with an ongoing surplus of allowances within the system and will serve as a key step toward the EU’s global climate commitments. The reform would develop a market stability reserve, a system under which allowances would automatically be taken off the market if the surplus reached a certain threshold. Those allowances would then be returned to the market if there were a lack of available allowances.
A global carbon market with a single agreed-upon carbon price would be a large market force, promoting investment in clean energy technology, King said. “There’s no question that high carbon prices are going to accelerate the transition as we move forward in time, and we simply have to discuss what an appropriate price is and what the public can accept as an appropriate price.”
