The Compliance Carbon Market Landscape
In the last decade the Compliance Carbon Market landscape has evolved and changed drastically. Many new schemes have emerged and are already into force, and many more are currently under development.
Significant structural reforms have taken place recently to guarantee the accomplishment of the growing emission targets.
There are several elements that define the different schemes, such as:
- Implementation levels or jurisdictions:
- Provinces & States
- Cap or emissions coverage
- Percentage of carbon credits allowed
- Carbon prices
- Sectors or activities covered
In addition, growing support from civil society and government has led to a significant growth in the market. According to the “ICAP Emissions Trading Worldwide 2023 Status Report” and “Refinitiv Carbon Market Year in Review 2022” these figures give us a sense of the state of the market:
The value of the Compliance Carbon Market reached approximately $865 billion in 2022 (14% increase over 2021).
This represents a growth of 2.5 times the value reached in 2020.
Transacted value Compound Annual Growth Rate (CAGR) of 47% between 2018 and 2022.
Jurisdictions make up 55% of global GDP are using emissions trading.
Almost 1/3 of the global population lives under a Compliance Carbon Market scheme in force.
17% of the global GHG emissions are covered by the Compliance Carbon Market.
Following the implementation levels described above, these are examples of the different levels of operation of some of these schemes in action. This highlights the fact that emissions trading systems operate at ALL level of government:
Worldwide overview of the different schemes in force, under development, and under consideration. These can be ETS, cap-and-trade, or carbon taxes.
Nevertheless, the size and scope of these mechanisms varies as we see in the following map.
In addition, not all ETS have the same level of “offset use” or the share of compliance obligations that can met using approved carbon credits. This means that carbon taxes play an important role in these schemes.
The carbon price and share of covered emissions per implemented ETS and carbon taxes also varies by region. Europe & Central Asia lead with the highest price level.
Finally, the implemented ETS also differ by the industry sectors that are included into their trading. The image below provides a quick overview of the sector coverage.
The CCM landscape is rapidly evolving. There are several schemes under use including Emissions Trading Systems, Cap-and-trade programs, and carbon taxes. This shows the wide palette of policy makers to enable market mechanism to assist in the rapid decarbonization of our economies. We expect more changes in the near future. So, please stay abreast with sources like the World Bank and ICAP.