More Governments Taking Up Carbon Pricing and Seeing Big Benefits in Revenues

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, a new World Bank report finds.

According to World Bank’s annual State and Trends of Carbon Pricing 2018 report, carbon pricing continues to gain traction.

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 $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 the U.S. states of California, Massachusetts, and Washington. But other regions are also active. 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 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.

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 further 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.