LONDON: Countries must increase the use of carbon markets to meet the Paris climate goals of limiting a global rise in temperature to 1.5 degrees Celsius (2.7 Fahrenheit), the Global Financial Markets Association (GFMA) said on Thursday.
Global leaders will gather in Glasgow, Scotland, from Sunday for a United Nations climate summit, when negotiators will seek to set rules on how carbon markets can be used under the Paris accord.
Just 20% of global greenhouse gas emissions (GHG) are covered by a regulated price, and the schemes that exist establish prices often too low to effect real change, a report by the GFMA and Boston Consulting Group said.
"Effective carbon pricing in the economy is one of the strongest tools to drive changed outcomes, treating GHG emissions as a time-limited resource," Steve Ashley, Chairman of GFMA and Head of Wholesale Division at Nomura, said.
An emissions trading system (ETS) sets a cap on the amount of emissions that a sector, or group of sectors, can produce. It creates "carbon permits" for those emissions that companies can buy for each tonne of carbon dioxide (CO2) they emit.
The average cost of a tonne of CO2 in existing schemes is less than $5 and needs rise to $50-150 a tonne by 2030 to meet the Paris goals, the report said.
Carbon prices in Europe's ETS, the world's most established scheme, trade around 60 euros ($69.83) a tonne, while China's ETS, which launched earlier this year, prices carbon at around 43 yuan ($6.73).
A global carbon price of $100 per tonne or more is needed by 2050 to meet climate goals, a Reuters poll of climate economists found earlier this month.
The Global Financial Markets Association comprises financial industry trade groups in Europe, Asia and the United States.