EMISSIONS TRADING MARKET ANALYSIS

Regional Analysis

Emissions Trading Market Regional Insights

• North America has established itself as the dominant region in the emissions trading market. The region is home to well-established carbon markets such as the Regional Greenhouse Gas Initiative (RGGI) and California Cap-and-Trade Program which have matured over the years. Stringent environmental regulations that are aimed at reducing greenhouse gas emissions have propelled growth. The industries complying with emissions caps such as power, oil and gas form a huge portion of regional gross domestic product (GDP). This large industrial presence coupled with decades of experience in emissions control, makes North America an important player.
• With abundant allowance supply and competitive pricing, North American markets have also attracted significant international participation through linking programs. Corporates comprehend value in diversifying their compliance portfolio across jurisdictions. The region exported offsets and allowances due to surplus in 2022. With talks of federal climate policy gaining momentum of late, experts predict that the emissions trading landscape in North America will continue to evolve in complexity.
• Asia Pacific has emerged as the fastest-growing region for emissions trading. Rapid economic growth and industrialization have drastically increased energy needs of populous nations like China and India. Both countries introduced national emissions trading schemes to curb pollution and meet commitments under the Paris Agreement. China already operates the world’s largest carbon market, accounting for over half of all allowances globally. The Chinese National Emissions Trading Scheme launched in 2022 commenced trading with much fanfare. Other smaller Asian markets are also being set up, as the region makes the paradigm shift towards a low-carbon future.
• With ambitious renewable targets and plans to price carbon across more industrial sectors, the Asia Pacific region is set for substantial growth. The large coverage of these emerging schemes will drive demand for offsets and allowances. Multinationals that are already operating in the region, recognize the business opportunities and are participating proactively in the evolving policy discussions. Continued economic expansion, supportive government policies, and an increased focus on ESG (Environmental, Social, and Governance) are expected to cement Asia Pacific’s position as the leader in emissions trading growth prospects.