Carbon markets are proving resilient to the coronavirus pandemic

(Climate Home News, 24 Mar 2021) After the 2008 global financial crisis, the price of pollution permits on the EU emissions trading system plummeted, hitting confidence in carbon markets as a lever for climate action.

The carbon price fell by more than 80% between mid-2008 and mid-2013, as the recession and other factors reduced demand for emissions allowances from power generators and heavy industries. Other systems also went through a period of low carbon prices.

With the coronavirus pandemic portending another long and deep economic downturn, some may fear another hit to carbon markets.

Fortunately, it looks like this time will be different.

It’s impossible to know the full impacts of Covid-19 on carbon markets at this stage: the inventories that governments maintain to track their emissions typically lag, and the world has not yet fully recovered from the public health and economic crises posed by the pandemic.

However, we’re seeing clear signs that the economic impacts of the pandemic will not prove a long-term drag on the effectiveness of carbon markets. The Emissions Trading Worldwide Status Report 2021, published annually by the International Carbon Action Partnership(ICAP), outlines some of the reasons why.

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Climate Home News, 24 Mar 2021: Carbon markets are proving resilient to the coronavirus pandemic