COP28: EC's von der Leyen calls more countries to embrace carbon pricing

The European Commission president called on more countries to develop carbon pricing regimes to accelerate climate action.

Speaking at the UN Climate Change Conference in Dubai, Ursula von der Leyen urged world leaders and carbon industry to help develop credible and common standards to drive a high-integrity carbon market.

"Carbon pricing is the centerpiece of the European Green Deal. In the European Union, if you pollute, you have to pay a price for that. If you want to avoid paying that price, you innovate and invest in clean technologies. And it works," she added.

More governments are looking to use carbon pricing as part of their climate policies, as they can provide a source of revenue, while helping companies assess the impact of climate change on their operations and investments. But so far, the number of countries or regions using such instruments remain relatively small.

As of mid-2023, there were 73 carbon taxes or ETSs in operation, according to the World Bank.

Von der Leyen said the Commission is ready to provide technical support to countries that are looking to introduce pricing systems such as an emissions trading scheme.

Carbon-pricing programs like the EU Emissions Trading System are considered an effective and economic way to reduce greenhouse gas emissions.

"Many countries around the world now embrace carbon pricing, with 73 instruments in place, covering a quarter of total global emissions. This is a good start, but we must go further and faster. The EU is ready to share its experience and help others in this noble task," von der Leyen said.

Carbon prices currently vary significantly on a country-to-country basis as there is no global carbon price. Carbon permits under the EU ETS are almost nine times more expensive than compliance prices in China, the industrial powerhouse of the world.

Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2023 at Eur70.81/mtCO2e ($77.10/mtCO2e) Nov. 30. This compared with China's compliance emissions price, which was valued at Yuan 71.84/mtCO2e ($10.10/mtCO2e) on Nov. 24, according to the Shanghai Environment and Energy Exchange.

Carbon taxes and pricing systems help provide a source of revenue for the government while helping companies assess the impact of climate change on their operations and investments. But so far, the number of countries or regions using such instruments remains quite small.

Common standards

The EC president also called on carbon industry to set robust standards to improve the integrity of its projects and offsets.

"Carbon credits must be based on common and robust standards that ensure an effective reduction of emissions through transparent and verified projects," she added.

"We need a credible standard that drives transformational investment, respects environmental limits and avoids lock-in to unsustainable levels of emissions or unjustified reliance on vulnerable removals," she said.

The voluntary carbon market has endured a difficult 2023 with the efficacy of many carbon projects and offsets facing intense scrutiny.

The credibility of many nature-based offsets and forest conservation projects has been questioned, with many in the media and academia questioning whether the programs represent genuine carbon reductions. This has led to a steep fall in liquidity and confidence in the market.

The Platts Nature-Based Avoidance price, which reflects the most competitive internationally fungible carbon credits issued by nature-based projects such as REDD+ projects, continues to languish at record lows.

The Platts Nature Avoidance 2023 was assessed at $4/mtCO2e Nov. 30, its lowest price since the assessment began in August 2021. Prices in January were as high as $11.60/mtCO2e.