Carbon prices in Asia are too cheap to help curb emissions

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, are not going to be sufficient to change the behavior 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 in May.

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

“Markets will only function well once tighter limits are imposed on pollution levels, raising prices and creating urgency among companies to curb emissions and demand for credits”

Chinese carbon prices peaked at around US$9 (S$12.44) a tonne early this year, while those in South Korea are not that much higher. Only New Zealand is anywhere near the US$80-plus 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, according to the International Monetary Fund (IMF). The current average price of US$6 a tonne of carbon-dioxide equivalent needs to rise to US$75 by 2030 to effectively limit global warming, the multilateral lender said. Here is a round-up of the progress so far in Asia.

SOURCE: NEWS AGENCIES