The architects and thought leaders of carbon markets in Japan, South Korea and China recently met on the sidelines of the Carbon Expo in Cologne to explore what it would take to link their emissions trading systems together in the future.
The meeting was convened by the Asia Society Policy Institute, the Carbon Pricing Leadership Coalition and the World Bank Group’s Networked Carbon Markets Initiative, and was used to discuss how enhanced regional cooperation could reduce the costs of emission reduction.
"Given the sheer density of carbon emissions coming from those three economies—China principally, but also Japan and Korea—it’s important to move ahead on a practical, policy and technical level to facilitate what would be for the world an important regional carbon market,” said former Australian Prime Minister Kevin Rudd who now heads up the Asia Society Policy Institute.
Collectively, Japan, China and the Republic of Korea account for over 21% of the global GDP and over 30% of global emissions. Creating a "North East Asia Carbon Market" could therefore enable a broader and more stable market for carbon abatement, increase the overall resilience of each country’s emission trading systems (ETS) to market shocks, bolster regulatory certainty and send a strong carbon price signal to the private sector to increase investment in the low-carbon transition. Expanding the availability of abatement options at lower costs could also enable countries to be more ambitious in their climate action goals.
The interest in linking mitigation efforts in North East Asia is consistent with an emerging global trend—many countries are increasingly interested in joining together, given the scale of the economic benefits that it could bring. The December 2015 Paris Agreement gives countries the green light to voluntarily buy and sell emissions reductions across borders, suggesting a cooperative approach that could see the deepening and expanding of links between jurisdictions, regions and sectors—or as some are calling them—“low-carbon clubs."