ICAP’s Emissions Trading Worldwide Status Report 2021 shows significant growth in the coverage of emissions trading systems (ETSs) with the launch of the China National ETS and a strong response to COVID-19 among systems in force across the globe.
This year carbon markets passed a resilience test, as they proved largely durable to the economic impacts of COVID-19. Although the pandemic led to initial price drops, prices on average significantly exceeded their pre-pandemic levels by the end of 2020. This market resilience can be attributed in part to two key factors: market stability measures that are now widely in place across systems and future expectations of more stringent conditions as governments pursue more ambitious targets. Despite the pandemic, ETS coverage continues to expand globally and gain a more significant role in climate policy as governments increasingly announce net-zero targets.
Global emissions covered by an ETS nearly doubled in 2021, from nine percent to 16 percent, as the number of systems in force grew from 21 to 24 with the launch of China’s national ETS as well as the German National and UK ETSs. Another 22 governments spanning Asia-Pacific to Europe are considering or actively developing an ETS, as work continues among individual US states and through the regional Transportation and Climate Initiative Program, Colombia completes technical work to launch a pilot system in 2023 or 2024, and Indonesia and Vietnam lay the legal and regulatory groundwork to launch systems in the future. Overall, one-third of the global population now lives under an ETS in force.