Revenues from carbon taxes and Emissions Trading Systems (ETS) reach $95 billion, demonstrating governments’ commitment to climate action.
The World Bank’s annual “State and Trends of Carbon Pricing” report, released today, reveals that revenues generated from carbon taxes and Emissions Trading Systems (ETS) have reached a remarkable milestone of approximately $95 billion. This achievement comes amid a challenging global context of high inflation, fiscal pressures, and energy crises faced by governments worldwide.
The report emphasizes the effectiveness of carbon pricing as a means to incorporate the costs of climate change into economic decision-making, thereby incentivizing climate action. Jennifer Sara, the World Bank’s Global Director for Climate Change, highlights the positive news that governments, even in difficult economic times, are prioritizing direct carbon pricing policies to reduce emissions. However, Sara emphasizes the need for significant advancements in terms of both coverage and price to drive the scale of change required.
The World Bank has been monitoring carbon markets for nearly two decades, and this year marks the tenth edition of the “State and Trends of Carbon Pricing” report. In the initial report published a decade ago, only 7% of global emissions were covered by either a carbon tax or an ETS. In contrast, the 2023 report reveals that 73 instruments now cover almost a quarter (23%) of global greenhouse gas emissions. ETS places limits on greenhouse gas emissions, enabling emitters with lower emissions to sell their extra emission units or allowances to higher emitters, thereby establishing a market price for emissions. On the other hand, carbon taxes directly set a price on carbon by defining a tax rate on emissions.
While emerging economies are showing an increasing uptake of ETS and carbon taxes, high-income countries continue to dominate in their implementation. Notably, Austria and Indonesia have introduced new instruments, and subnational jurisdictions in the United States and Mexico have followed suit. Australia is scheduled to resume carbon pricing with a rate-based ETS commencing in July 2023, and countries such as Chile, Malaysia, Vietnam, Thailand, and Türkiye are actively working toward implementing direct carbon pricing.
The report notes a slight decline in the issuance and retirement of carbon credits compared to 2021. Macroeconomic conditions, criticism of carbon credits and offsetting practices, and bottlenecks in issuance are cited as causes for this slowdown over the past year. Nevertheless, the report identifies encouraging signs of international cooperation on carbon markets within the framework of the Paris Agreement.
Follow Us on Google News and help us grow – Click for Latest News
The report underscores that carbon pricing serves as a crucial tool for generating revenue, directing international financial flows, and driving innovation. When integrated into a broader policy package, these measures can effectively contribute to broader sustainability and development goals. The World Bank’s core climate diagnostics, known as the Country Climate and Development Reports, highlight the potential of direct carbon pricing policies to support countries on their development pathways.
The “State and Trends of Carbon Pricing” report was launched at Innovate4Climate, the World Bank Group’s flagship climate action event held this year in Bilbao, Spain, from May 23 to 25. Now in its seventh year, the I4C conference fosters a global dialogue between the public and private sectors, showcasing opportunities and innovations for low-carbon, resilient development, and facilitating the exchange of knowledge to promote investments in transformative climate-smart solutions.