The Paris Agreement on climate change entered into force in November 2016. This landmark agreement has set the world on the path to a low-carbon economy — a critical step to achieving shared global prosperity and averting the worst effects of climate change. Enormous economic opportunities, in the form of new investment, new jobs, and entirely new economic activities and industries, exist for the countries that take the lead in developing and deploying the next generation of low carbon energy technologies.
Governments must play a central role in this transition by putting in place policies that reflect the true costs of fossil fuels, foster and reward low-carbon innovation, and ensure equitable and competitive access to abundant and affordable clean energy. Well-designed carbon pricing policies can achieve those aims while also generating revenues to invest in emissions reductions, meet the needs of local communities, spur innovation and ensure a just transition for workers and industries. This is why carbon pricing is gaining momentum around the world: Nearly 70 countries, states, provinces, and cities around the world, home to more than 1.6 billion people, are implementing carbon pricing mechanisms such as emission trading programs or carbon taxes. This includes two of the world’s largest economies and emitters, the EU and China.
The Americas are well-positioned to lead the world on carbon pricing, with carbon taxes or emission trading already being implemented in Chile, Mexico, Colombia, California, the nine states of the Regional Greenhouse Gas Initiative, Washington, Alberta, British Columbia, Quebec, and Ontario. Carbon pricing is under discussion in additional countries, states, and provinces.
The growing collaboration taking place through forums such as the Pacific Alliance creates an opportunity for a more coordinated approach in the design of policy frameworks. The pioneering common carbon markets of California and Quebec are demonstrating the benefits of cooperation. Mexico is working already in the potential linkage to that North American market, because it offers a path for meeting its highest climate ambitions.
Mexico is also working towards establishing a carbon market by 2018, as well as robust national clean energy certificates for the electricity sector by 2018. Both of these efforts will directly support the attainment of the national mitigation goals. Implementation of these objectives will be based on the market-based mechanisms that Mexico started in 2013—several of which have already been embedded in legislation.
As carbon pricing becomes more and more widespread across the world, a new opportunity emerges. Regional integration of carbon pricing policies, including by linking existing emission trading programs and making new programs “linkage-ready,” can promote cost-effectiveness, support investment and innovation at scale, ensure a level playing field for companies, and enhance ambition. The World Bank estimates that cooperation through markets can enable nations to save up to 30% in the cost of implementing their Paris pledges for 2030 – and 50% by 2050. By then, cost savings resulted from international cooperation will reach about US$ 4 trillion or 2% of the global GDP.
In 2015 and 2016, the Climate Summits of the Americas demonstrated the potential gains from greater cooperation and laid the groundwork for further collaboration. To build on that momentum and take full advantage of the opportunities made possible by greater integration, national and subnational jurisdictions throughout the Americas should continue to work together to strengthen their carbon pricing programs and align them with ambitious long-term targets.
We welcome the support and active engagement of businesses, nongovernmental organizations, and civil society in developing and implementing durable, equitable, and effective carbon pricing policies.
The meeting held in Mexico, January 24th and 25th under the title “The Advantage of International Cooperation in Achieving Regional Mitigation Goals in the Americas” brought together over 250 participants from governments, businesses, civil society and international organizations of different regions of the globe. This spirit of international collaboration was reflected in among other actions, by the signing of a MoU between the Business Council for Sustainable Development of Mexico (CESPEDES) and the International Emissions Trading Association; as well as an MoU between the Mexican Ministry of Environment and Natural Resources, and Environmental Defense Fund.
Building on the momentum from these discussions, and recognizing the interest expressed by partners in advancing our common vision toward implementation of carbon pricing across the Americas, Mexico will host the Latin American Caribbean Carbon Forum in the second half of 2017, which provides an opportunity to engage in a regional leadership dialogue.