A record $63 billion was raised from the sale of carbon allowances across 28 emission trading systems (ETS) in 2022, as many countries increased ambitions to cut pollution despite record high energy prices following Russia’s invasion of Ukraine, a report said on Wednesday.
"Instead of weakening climate ambitions, the energy crisis pushed governments towards ending their fossil fuel dependency quicker, supported by policies like emissions trading," said Stefano De Clara, head of intergovernmental forum International Carbon Action Partnership (ICAP).
To encourage companies to invest in low carbon technology and help meet climate targets, many countries and regions have launched emissions trading systems to put a price on carbon dioxide (CO2) emissions and incentivise companies.
Under an ETS, governments set a cap that will gradually decrease on the amount of emissions produced by a sector, or group of sectors. They create carbon allowances for those emissions, which are auctioned, and companies must buy one for each tonne of CO2 they emit.
There are currently 28 emissions trading systems in force, said the report, three more than last year, with 20 more systems under way or consideration across the world, particularly in the Latin American and Asia-Pacific regions. The share of global emissions covered by an ETS remains stay unchanged at 17%, as the increase in coverage thanks to the introduction of new systems was offset by the overall reduction in emissions under ETS caps.
The $63 billion revenues from allowance auctions in 2022 rose from $59 billion in 2021, the report said.
Prices in the EU ETS, the world’s most established scheme, rose to an average of $83 a tonne, up from $65 in 2021, the report showed.
Last year, EU countries and lawmakers agreed reforms to the EU carbon market which will cut emissions faster and start to phase down free allowances given to industry.
The allowance price in California and Quebec, which have linked schemes, grew to $28 in 2022, up from $22 in 2021.
In China’s ETS the average allowance price was $8 in 2022, up from $7 in 2021, the report showed.