Global carbon pricing will not allow the 2 °C by the end of the century

With the entry into force in 2005 of the Kyoto Protocol (KP) to the United Nations Framework Convention on Climate Change (UNFCCC), the first carbon trading scheme was born in Europe, under the name of the European Union Emission Trading System (EU ETS).

Four years later, with the KP commitment period (2008-2012), the international inter-state carbon trading scheme was launched. However, this trading system, based on the greenhouse gas (GHG) emission caps of the Parties to the UNFCCC, has seen little activity due to over-allocation of allowances and the absence of a binding Kyoto Protocol 2. The price of the international allowance from this market, known as Certified Emission Reduction (CER), collapsed at the end of 2012 and has since remained at less than €1/tCO₂eq.

Faced with the failure of international negotiations to reach a global agreement to reduce GHG emissions that would be binding on all countries, the Paris Agreement in 2015 changed the modus operandi and let the Parties enter their voluntary national GHG reduction targets for 2025-2030, known as Intended National Determined Contributions (INDCs). As part of these INDCs, carbon pricing is presented as a public policy tool for reducing GHG emissions.

For example, since COP21 (the 2015 Paris climate change conference), there have been a growing number of initiatives to set up a GHG quota trading scheme and/or a carbon tax at global level.

This article provides an overview of existing GHG emissions pricing systems, including emissions trading schemes, carbon taxes, voluntary systems and private GHG pricing within companies.

In 2015, the Paris Agreement resulted in a dual objective: to contain the rise in temperature since pre-industrial times "below 2°C" and to aim for an increase of 1.5°C by the end of the century. This latter objective looks increasingly difficult to achieve. With regard to the carbon budget of GHG emissions remaining between now and the end of the century, in order to avoid exceeding the 2°C rise in average temperature, this article compares the deployment of carbon pricing with the dynamics of fossil fuel production and consumption in the main countries.

What is the objective of the various countries, jurisdictions and private companies introducing carbon pricing? Is carbon pricing really effective in reducing GHG emissions? These are the questions this article seeks to answer.

The terms essential to understanding this article are listed in a glossary at the end of the article.