The idea behind carbon pricing is to put a price on GHG emissions that reflect their true cost. Some 39 countries and over 20 cities and regions have put a price on carbon, either in the form of a carbon tax or through emissions trading, in which markets place a price on the available emission allowances.
Currently, 18 emissions trading schemes have been implemented or are in preparation around the world. Three of these are in North America. South Korea opened a nationwide carbon market in January 2015. China has established six carbon markets and plans to open a nationwide carbon market in 2016, but is not ready for a global or regional carbon market. Australia repealed its carbon pricing mechanism in 2014. The EU Emissions Trading System (EU ETS), the world’s largest carbon market, suffers from an oversupply of allowances and prices too low to incentivise investments in low-carbon technologies. A proposal for reforming the ETS is currently being debated by the Council and European Parliament. The international carbon-trading mechanisms established under the Kyoto Protocol are linked with the ETS. Discussions on new market mechanisms are being held within the UNFCCC framework.
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