More than one-third (37%) of global emissions captured by net-zero targets (90% of all emissions) operate under emissions trading systems (ETSs), reports the International Carbon Action Partnership (ICAP), an international government forum.

From the beginning of 2022, 25 ETSs are active globally, representing 55% of the world’s GDP and 17% of global greenhouse gas emissions, according to ICAP’s global emission trading status report for 2022, released on 28 March.

A further 22 ETSs are in development or under consideration, mainly in South America and South East Asia.

An aerial shot of an industrial plant emitting smog. (Photo by TR Stock Via Shutterstock)

“The temptation to pull back from climate ambitions is great […] as governments grapple with soaring inflation and energy prices,” said Stefano De Clara, head of the ICAP secretariat. “However, this would be a mistake, and delaying the low-carbon transition would set the stage for further crises and price crunches in the future. The push to net zero is a huge opportunity for innovation, and emissions trading can help.”

In addition to capping emissions, ETSs can incentivise investments in sustainable technologies and support the most vulnerable communities with the low-carbon transition.

Carbon markets proved resilient to the economic shocks of the Covid-19 pandemic, says ICAP. Allowance prices and carbon market revenues rose in nearly all ETSs over the past year. By the end of 2021, global ETSs had raised a record $161bn in auctioning revenues, growing by more than 50% since the end of 2020.

ICAP welcomes the “long-awaited clarity on Article 6 rules” for international collaboration on emissions trading from COP26.

It rates the performance of existing ETSs in China and the UK, and recommends that the UK expand its ETS into the maritime industry, as the EU is doing. Going forward, ICAP will explore how ETSs can address carbon removal.