Paris Agreement objectives to drive development of carbon pricing and carbon markets, says Ursula von der Leyen

European Commission President Ursula von der Leyen hosted a high-level event at COP28 on Friday to promote the development of carbon pricing and carbon markets, as powerful instruments to reach the Paris Agreement objectives.

This is intended to build on the Call to Action for Paris Agreement-aligned Carbon Markets that the European Commission, Spain and France launched in June 2023.

Ursula von der Leyen said: “Carbon pricing is the centrepiece of the European Green Deal. In the European Union, if you pollute, you have to pay a price for that. If you want to avoid paying that price, you innovate and invest in clean technologies. And it works.

“Since 2005, the EU ETS has reduced emissions in the sectors covered by over 37%, and raised more than €175 billion. Many countries around the world now embrace carbon pricing, with 73 instruments in place, covering a quarter of total global emissions.

“This is a good start, but we must go further and faster. The EU is ready to share its experience and help others in this noble task.”

She further stated: “What brings us here today is our resolve to boost a global movement. Last June in Paris, we launched a Call to Action to create more carbon markets that are aligned with the Paris Agreement.

“Today, we are joined by the IMF, World Bank and WTO.

“You have an essential role to play to support and incentivise change. Together we want to advance on three basic goals. First, we want to assist more and more countries to create and complete their domestic carbon markets. Worldwide, there are already 73 carbon pricing instruments in place.

“But they cover only 23% of global emissions.

“This share needs to increase. It will allow for a faster reduction of emissions. It will create a level playing field for international trade. And it will raise more revenues for global climate action, including in the developing world. Let us work on putting a price on all C02 emissions in the world.”

President of the World Bank Mr Ajay Banga, Director General of the World Trade Organisation Dr Ngozi Okonjo-Iweala, and the Managing Director of the International Monetary Fund, Ms Kristalina Georgieva all participated in the European Commission event.

The four organisations all underlined the importance of carbon pricing for the climate and for a fair transition. Today’s event also included interventions from Prime Minister of Spain, Pedro Sanchez, and President of Zambia, Hakainde Hichilema, who shared their country’s perspective on the challenges and benefits of further developing carbon pricing and ensuring the high integrity of international carbon markets.

The Commission will continue to provide technical support to countries that wish to introduce carbon pricing regimes in their domestic legislation, and to help them to build robust approaches to international carbon markets that are consistent with their long-term climate and development strategies.

Carbon credits will be based on common and robust standards that ensure an effective reduction of emissions through transparent and verified projects.

The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France, on 12 December 2015. It entered into force on 4 November 2016.

Its overarching goal is to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.”

However, in recent years, world leaders have stressed the need to limit global warming to 1.5°C by the end of this century.