Today (7th) Taiwan established a carbon rights exchange. You may have heard the news that "the price of EU carbon rights has exceeded 100 euros per metric ton", but are domestic carbon rights exchanges the same as EU carbon rights? Are carbon rights so expensive in all countries? The answer is no.
In the international carbon market, there are mainly two types of transactions: carbon emission quota (Allowance), trading and carbon offset credits (Credit). The European carbon market is dominated by emission quotas; domestic “carbon rights” fall into the second category, the trading of carbon offset credits. Let’s take a look at their differences!
1. Big differences in sources
Carbon emission quota (Allowance):
From the concept of "Cap and Trade". The government sets a limit on how much carbon a company can emit (emissions quota) based on past emissions data. If the emission quota is low, the "extra reduction" can be traded.
For example, Company A obtains an emission quota of 100 metric tons of carbon dioxide equivalent and actually emits 80 metric tons, so 20 metric tons can be traded. Company B, which has insufficient carbon reduction, purchases emission quotas through trading to meet policy specifications. This system can achieve substantial economic benefits from carbon reduction.
Carbon offset (Credit):
The carbon offset credits come from carbon reduction projects such as tree planting, energy conservation, and ecological restoration, and then the carbon reduction amount is converted into credits through methodology. (For details, see Environmental Information Center Q&A: What is carbon offset? How does the carbon offset credit come about?)
2. The price difference is huge
Carbon emission quota (Allowance):
Carbon market prices are not consistent across countries. Take the European Union Carbon Market (EU ETS) as an example. As the EU gradually reduces its emission quotas, there are fewer tradable quotas, and the carbon price rises. In February 2023, it reached nearly 100 euros (approximately NT$3,490) per metric ton.
Carbon market price fluctuations in the past five years. Image source: World Bank 2023 Carbon Pricing Status and Trends Report (CC BY 3.0 IGO)
Carbon offset (Credit):
Carbon offset credits come from different projects, and the price also varies depending on the type of carbon reduction project. Among them, the price of carbon removal is the highest, ranging from approximately US$15-20 per metric ton (approximately NT$470-630). The remaining carbon credits are priced below US$10 (approximately NT$315).
Reference resources:
World Bank (May 2023), State and Trends of Carbon Pricing 2023
Information source: Environmental Information Center (https://e-info.org.tw/node/237343)
