The International Carbon Market's Understanding of Carbon
Carbon emissions trading is a policy tool that utilizes market mechanisms to control and reduce greenhouse gas emissions. The latest data and empirical evidence indicate that the carbon market has a significant emission reduction effect. As of 2024, there are 36 carbon trading systems in operation worldwide, with an additional 22 under development or consideration for design. The carbon emissions trading market has covered nearly one-third of the world's population and 58% of GDP, controlling approximately 10 billion tons of greenhouse gas emissions, accounting for about 18% of the total global emissions. Since 2007, the cumulative revenue of the global carbon market has exceeded 300 billion US dollars, greatly supporting investment in emissions reduction and green low-carbon transformation.
In 2024, the introduction of a series of policies has brought about changes in the global carbon market, providing development ideas for the future development of the carbon market.
From the perspective of the international market, driven by both the decline in natural gas prices and emissions, the overall trading prices have decreased, highlighting the role of policy regulation. In 2024, the average futures price for the European Union Allowance (EUA) of the European Union Emissions Trading System (EU ETS) is 65.3 euros/ton, a decrease of 21.8% from 2023 and 19.2% from 2022.
2024 is the first year of significant reform of the carbon market under the "Fit for 55" emission reduction plan, with the quota cap reduced from 1.486 billion tons in 2023 to 1.386 billion tons. However, from the perspective of market performance, EUA prices have not increased, but have shown a downward trend, mainly due to the decline in natural gas prices, the reduction of emissions in the power industry, and the increase in quota auction volume. The EU ETS plans to launch a second carbon market in 2027, including construction, road transportation, and uncovered small-scale industries. At that time, over 75% of the EU's greenhouse gas emissions will be included in carbon market controls.
It is worth noting that the carbon market provides a framework and platform for promoting cooperation in emissions reduction among regions, and gradually generates additional impacts beyond emissions reduction itself. At present, the connection between California in the United States and Quebec in Canada, as well as the connection between the European Union and the Swiss carbon market, have provided successful experiences for cross-border provincial cooperation and cooperation between countries. With the strengthening of regional carbon market connectivity, the linkage agreement is gradually improving. On November 24, 2024, the 26th United Nations Climate Change Conference (COP29) made significant progress in climate financing, loss and damage funds, and international carbon market mechanisms. Although the first batch of methodologies under clause 6.4 has not yet been determined, the project registration mechanism has been opened. As of December 31, 2024, 735 projects have been submitted for registration, mainly focusing on developing countries' wind power, photovoltaic power generation, biogas utilization, landfill gas utilization and other projects. Among them, India has submitted 471 items, ranking first. Two projects, 250MW wind power in Tianshui, Gansu, China and 80MW solar photovoltaic power in Qixian, Jinzhong, Shanxi, have been registered.
According to official monitoring data, the direct emission reduction effect of the carbon market has been widely confirmed. In November 2024, the European Commission released a report on the operation of the EU carbon market in 2023, which showed that the total industry emissions covered by the EUETS in 2023 were 1.1491 billion tons of CO2e, a decrease of 15.6% from 2022 and a decrease of about 47.6% from 2005. From the perspective of the industry, emission reduction is mainly driven by electricity and industrial facilities. The emissions from electricity and industrial facilities in 2023 were 1.0959 billion tons of CO2e, a decrease of 16.5% from 2022, making it the year with the largest decline to date. Among them, the emissions from electricity and heat production decreased by 24% year-on-year, mainly due to the significant increase in renewable energy generation and the substitution of coal-fired power generation by gas-fired power generation. The emissions of energy intensive industries decreased by 7.5% year-on-year, mainly due to the reduction of industrial output and the improvement of production efficiency.
Empirical research has also evaluated the causal effects of emission reduction. As the world's earliest operating carbon market, from 2008 to 2016, the CO2 emissions of industries covered by the EUETS decreased by about 1.2 billion tons, and the emission reduction effect was significantly enhanced in the second stage, mainly due to the gradual improvement of various mechanisms of the EUETS.