Climate Change policy in Asia: Global linkage

Posted on January 8, 2011 by

Pressures from business and uncertainty over the UN climate negotiations can potentially lead to drop in the prices of carbon credits. Besides this, Asia’s major economies are interested in making their own national plans to keep an eye on emerging carbon markets and assign value to the emissions. Asia is creating opportunities for the Carbon trading, Renewable Energy Certificates, Energy Efficiency Certificates, etc, though not in an integrated manner, but as a sum total of various countries’ national plans. These actions have a potential to drive Asia towards a low carbon economy.

Clean technology sector is attracting attention from businesses of various sizes in Asia. Large multinational giants such as Samsung and LG Group have fixed their attention on clean tech. They plan to invest over $80 billion in clean technologies over the next decade. The race is not limited to large MNCs, but it encompasses countries too. China is planning to introduce market based mechanisms for emission trading and Australia aims to do so by putting price on carbon later this year.

Future of Global Carbon Market

The top three GHG emitters in Asia are China, India and Japan, which worldwide are all within top 10. Therefore, the potential value of carbon market in this region is enormous. Establishing a carbon market in Asia will definitely increase the worldwide carbon market size. This will create high-value added jobs across the globe. A market for carbon will also drive countries to dealing with energy security and pollution issues in sustainable manner. This will help Asia in moving to a low carbon economy.

The booming low carbon economy is expected to create good future for the participating countries. There are uncertain fears that the carbon policies will lead to shift of production by polluting companies to nations with no carbon limits. This phenomenon of shifting is termed as “leakage” for the GHG emissions in the UNFCCC parlance. If more and more systems of carbon market, such as the proposed Chinese market, the EU-ETS, India’s REC framework are linked to each other, the issue of “leakage” can be tackled effectively.

Another difficulty facing the unification or linking of carbon markets is the number of different available offsets standards like Kyoto, California’s own cap and trade system etc. This can create coordination difficulties in the offsets trading. Making offsets from one region tradable in another can reduce the problem. This however will need a strong political will and alignment of policies globally.