Carbon Pricing for Climate Action: New Countdown to COP Policy Briefing

This policy briefing by the Climate Bonds Initiative examines the expansion of carbon pricing into trade and economic policy, specifically focusing on the European Union's Carbon Border Adjustment Mechanism (CBAM). It argues that carbon pricing, when combined with preferential treatment for green goods and a 'Just Transition' spending policy, can drive global green capital flows and decarbonize hard-to-abate sectors.

• The European Union's Carbon Border Adjustment Mechanism (CBAM), part of the 'Fit for 55' proposal, applies a carbon price to imports of goods most vulnerable to carbon leakage, specifically electricity generation, aluminium, fertiliser, cement, and iron and steel. This mechanism shifts climate policy from science and technology into the realms of trade and economic policy, aiming to prevent carbon leakage while the EU ETS is tightened to achieve a 61% emissions reduction in ETS sectors by 2030.
• Global carbon pricing is expanding, with the World Bank reporting 64 instruments in operation as of May 2021, covering more than 20% of global greenhouse gas emissions and generating USD53 billion in revenue. China launched its national ETS on July 16, 2021, initially limited to coal power but intended to become the largest in the world, while twelve US states representing one-third of US GDP utilize some form of carbon pricing.
• The Inevitable Policy Response (IPR) forecasts a tiered global carbon pricing system by 2030. This system would feature higher price bands for developed economies, led by the EU with backstop signal prices between USD60 and USD85 by 2030, and lower bands for developing and emerging nations. Additionally, IPR forecasts US carbon pricing to reach USD65/tCO2 by 2030.
• To maximize the effectiveness of carbon pricing, the briefing proposes a 'green window' and a 'Just Transition' spending policy. The 'green window' would provide preferential treatment, such as 'zero tariffs on zero-carbon' for environmentally friendly goods and services. Simultaneously, allocating CBAM revenues to bilateral climate partnerships or investment funds for developing countries would support their decarbonization of CBAM-affected sectors.

APA

Climate Bonds Initiative (2021). Carbon Pricing for Climate Action: New Countdown to COP Policy Briefing. https://www.climatebonds.net/news-events/blog/carbon-pricing-climate-action-new-countdown-cop-policy-briefing

Chicago

Climate Bonds Initiative. Carbon Pricing for Climate Action: New Countdown to COP Policy Briefing. 2021. https://www.climatebonds.net/news-events/blog/carbon-pricing-climate-action-new-countdown-cop-policy-briefing.

Wikipedia

{{cite report |author=Climate Bonds Initiative |title=Carbon Pricing for Climate Action: New Countdown to COP Policy Briefing |date=23 September 2021 |url=https://www.climatebonds.net/news-events/blog/carbon-pricing-climate-action-new-countdown-cop-policy-briefing |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatebondsinitiative2021carbon, author = {{Climate Bonds Initiative}}, title = {{Carbon Pricing for Climate Action: New Countdown to COP Policy Briefing}}, institution = {Climate Bonds Initiative}, year = {2021}, month = sep, url = {https://www.climatebonds.net/news-events/blog/carbon-pricing-climate-action-new-countdown-cop-policy-briefing}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }