UN Report Finds Carbon Pricing Crucial for Sustainable Future of Island Economies

A new United Nations report highlights carbon pricing as a promising tool for driving both economic resilience and low-carbon growth in small island developing states (SIDS). When adapted to their unique economies and implemented alongside broader environmental strategies, it could become a cornerstone of sustainable development.

High-resolution aerial perspective of Caribbean SIDS. AI generated picture.

The report underscores that carbon pricing should function as part of a wider framework that ‘supports resilience, fosters low-carbon development, and advances the climate and sustainable development objectives of SIDS’, rather than as a goal in isolation.

The findings stem from the Regional Dialogue on Carbon Pricing (REDiCAP) for SIDS—an initiative under the Collaborative Instruments for Ambitious Climate Action programme launched at COP22 in 2016. This effort helps countries integrate carbon pricing mechanisms into their Paris Agreement commitments, aligning them with their Nationally Determined Contributions.

According to the report, success depends on international support, technical capacity, and strong institutional systems. It identifies capacity building as both ‘a prerequisite and a co-benefit of engaging with carbon pricing’, noting that many island states still lack the monitoring, reporting, and verification infrastructure required to manage these systems effectively.

‘Addressing these gaps will require sustained and hands-on approaches to capacity building, rather than short-term interventions, with a strong emphasis on national ownership and continuity’, the report said.

The study also points to the opportunities offered by Article 6 of the Paris Agreement, which enables countries to trade emissions reductions through international carbon markets. For SIDS, this mechanism can act as ‘a catalyst for domestic capacity strengthening’ while generating new revenue streams. However, the report cautions that cooperation under Article 6 must ensure ‘environmental integrity, equitable benefit-sharing, and alignment with national climate and development priorities.’

Finally, the UN urges SIDS to strengthen collaboration through regional networks—sharing knowledge, pooling resources, and amplifying their collective influence in international environmental negotiations.