Cheap carbon prices not helping curb emissions

Tighter limits will ‘help markets’ function better

“Carbon pricing is one of the most powerful tools to put economies on low-emission paths, but price signals must be sustained.”

World Bank

SEOUL: More Asian governments are putting prices on emissions to try and curb global warming, but the region’s carbon markets and taxes are mostly off to slow and disappointing starts.

Carbon prices in China and South Korea are at just fractions of where they are in the European Union, and also well below levels estimated to have a meaningful impact on the climate, while taxes in Japan and Singapore have been set at very low levels.

That suggests these markets, at least at their current trajectories, aren’t going to be sufficient to change the behaviour of polluting industries or help countries reach their net-zero goals.

Asia is struggling to adopt ambitious pollution pricing instruments, especially at a time of soaring inflation, rising energy prices and economic instability.

Carbon pricing is one of the most powerful tools to put economies on low-emission paths, but price signals must be sustained, strengthened and extended to a greater portion of global emissions, the World Bank said.

Asia’s carbon markets lack tough regulations, “which means they are unable to give the right signals that lead to emission reductions,” said Youn Sejong, a director at Plan 1.5, a Seoul-based climate advocacy organisation.

Chinese carbon prices peaked at around US$9 (RM40) a tonne early this year, while those in South Korea aren’t that much higher. Only New Zealand is anywhere near the Us$80-plus (RM357) a tonne level in Europe, the most liquid carbon market.

Some 46 countries worldwide are now pricing carbon through trading schemes or taxes, covering around a third of emissions, the International Monetary Fund (IMF) said.

The current average price of US$6 (RM27) a tonne of carbon-dioxide equivalent needs to rise to US$75 (RM334) by 2030 to effectively limit global warming, said the IMF.

China, the world’s largest emitter, launched its emissions trading scheme in the middle of last year.

The initial focus is on more than 2,200 electricity generators that account for about 40% of the country’s emissions, with steel, cement, aluminum and petrochemical producers next in line to join.

However, and there have been delays in adding new industries as well as data collection problems.

South Korea introduced a national emissions trading system (ETS) in 2015. It has since expanded to cover 74% of domestic emissions across industries including power, transport, aviation, construction and waste management.

The carbon price remains relatively low, at 28,000 won (US$21.57 or RM96.22) per tonne of carbon dioxide equivalent, around a quarter of the level in Europe.

New Zealand launched an ETS in 2008, with major reforms made to it last year.

Those included a new cap on unit supply and the introduction of an auction mechanism. The nation’s carbon price is the highest in Asia, at NZ$83.32 (US$52.39 or RM233.72).

Japan was the first Asian country to impose a national carbon tax, in 2012, but it’s set at just 289 yen (US$2.17 or RM9.68) per tonne of Co2-equivalent.

The environment ministry had requested the introduction of a much higher levy, but the government backed away from the proposal amid industry protests.

Singapore introduced a carbon tax, set at S$5 (US$3.62 or RM16.15) per tonne of Co2-equivalent, in 2019.

It’s planning to raise it to US$25 (RM111.53) in 2024, and then lift it gradually to US$50 (RM223) to US$80 (RM357) by the end of the decade.