Prospects for international carbon markets

4 March 2016

At the United Nations climate conference in Paris in December 2015, governments committed themselves to keeping the average global temperature increase to no more than 2°C above pre-industrial levels whilst aiming to limit the increase to 1.5°C. The international climate agreement included another result: it gave a clear role for market-based mechanisms as a tool to reduce emissions and thus global warming. More and more countries, regions and businesses are using, or considering the use of, market-based mechanisms such as emission trading schemes to price carbon. There is much that stakeholders can learn from one another in this respect, and more that could be done to turn a growing patchwork of disconnected mechanisms into collective action. This Policy Dialogue sought to discuss current developments in carbon pricing mechanisms and prospects for linking systems together. Key issues covered included lessons learnt from existing emission trading schemes; the implications of the Paris Agreement on carbon pricing and markets; and the benefits, challenges and rules to be considered if and when markets are linked.