The Paris Climate Change summit in December 2015 crafted a system of flexible, bottom-up national commitments to reducing carbon emissions. More so than past efforts, this nascent policy environment encourages climate change responses that cater to the specific political, economic, and physical circumstances of individual countries, cities, and communities. The next generation of carbon markets is providing tools for these actors to meet the climate commitments they agreed to in Paris.
Nearly 40 countries and more than 20 cities, states, and provinces, accounting for more than 22 percent of global emissions, are pricing carbon in some form. As existing and future pricing efforts mature, possibilities emerge for linking markets across jurisdictions to create flexible, regionally-based systems. Such market linkage holds great promise in Northeast Asia. China, Japan, and South Korea comprise over 30 percent of global carbon emissions and have established nascent carbon markets with cap-and-trade systems. Linking these markets could reduce the cost of mitigating emissions, offer businesses operating in the region more options for meeting emissions requirements, and allow the countries to establish more ambitious emissions reduction goals in the future.
Linking markets takes technical expertise, strategic vision, and diplomatic energy. It will not occur overnight, and requires a series of preliminary steps and pilot initiatives to be successful. The Asia Society Policy Institute (ASPI) is building a stakeholder coalition to pursue these steps, and helping set the foundation from which Northeast Asian carbon market linkage can develop. To this end, ASPI convened a high-level roundtable on the sidelines of the Global Carbon Expo in May 2016 in partnership with the World Bank Networked Carbon Markets Initiative and with participation from international thought leaders and regional practitioners. ASPI is leveraging the outcomes from this dialogue, which was supported by the Children's Investment Fund Foundation, to create a Roadmap for Action through 2017.