Governments at national and subnational levels around the world continue to prepare for, and implement, carbon pricing initiatives as a means to curb their emissions while raising revenues. In 2017, governments raised about U$33 billion in carbon pricing revenue, a 50 percent increase from 2016, according to a new World Bank report.
The annual report “State and Trends of Carbon Pricing 2018” was launched at Innovate4Climate conference, the World Bank Group’s flagship annual event on climate finance, investment, and markets, in Frankfurt, Germany. It shows that carbon pricing continues to gain traction.
Produced with support from Ecofys, a Navigant Company, as well as from the Carbon Pricing Leadership Coalition, CDP, Climate Transparency, the Institute for Climate Economics, the International Climate Action Partnership and the Partnership for Market Readiness, this edition of the report, also includes emerging trends as countries negotiate the guidelines of the Paris Agreement, in the run-up to the 24th Conference of the Parties (COP24) to the United Nations Framework Convention on Climate Change (UNFCCC).
To date, 70 jurisdictions – 45 national and 25 sub-national – have implemented, or are scheduled to implement carbon pricing initiatives. These mechanisms helped governments raise about US$33 billion in 2017 in carbon pricing revenues from allowance auctions, direct payments to meet compliance obligations, and carbon tax receipts. This represents a 50 percent increase compared to the US$22 billion raised in 2016.
Implementation of carbon pricing initiatives has tripled in the past decade. In 2016 and 2017, this increase was primarily driven by jurisdictions in the Americas, including Chile, Colombia, the Canadian provinces of Alberta and Ontario, and in the states of California, Massachusetts, and Washington in the United States.
In December 2017, China announced its plan to operationalize its national emissions trading system (ETS) in phases, starting with the power sector. With a fully operational Chinese ETS, carbon pricing mechanisms around the world are projected to cover 11 gigatons of carbon dioxide equivalent (GtCO2e), or about 20 percent of global greenhouse gas (GHG) emissions, up from 15 percent last year.
The report also finds that carbon prices are rising, with about half of emissions now covered by carbon pricing initiatives priced at over US$10/tCO2e, compared to one-quarter of emissions covered in 2017.
Governments at all levels are starting to see the effectiveness of carbon pricing in their efforts to cut harmful carbon pollution while also raising revenues for climate and other policies, including environmental action. As countries take stock of their Paris Agreement commitments and set a path towards increased ambition, carbon pricing mechanisms with robust pricing levels are proving to be essential elements of the toolkit, said John Roome, World Bank Senior Director for Climate Change.
The report also highlights emerging trends in carbon pricing, including the growing prominence of efforts in Asia and the Americas, the use of carbon pricing initiatives to serve multiple environmental and social objectives, and the adoption of phased approaches to make changes as initiatives progress.
The report also notes the rise of innovative tools and technologies, as well as momentum to divest from fossil fuels – factors that have played a role in the advancement of carbon pricing initiatives.