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New analysis reveals 75 carbon pricing regimes generated $104bn last year, with more than half of revenues going towards climate and nature-related programmes
Revenues from carbon pricing schemes topped $100bn for the first-time last year, but carbon taxes and emissions trading schemes around the world "continue to fall short" of the price signals required to achieve the climate goals set out in the Paris Agreement.
That is according to the World Bank, which this afternoon published its annual State and Trends of Carbon Pricing Report tracking the implementation and impact of carbon pricing schemes around the world.
The report confirmed a record $104bn in revenues were generated by the world's 75 carbon pricing regimes last year. But it also warned carbon taxes and emission trading schemes remain largely unaligned with the net zero goals set by governments.
While 24 per cent of global emissions are covered by a carbon pricing scheme, less than one per cent are covered by a direct carbon price at or above the range recommended by the High-Level Commission on Carbon Prices to limit temperature increases to 'well below' 2C - the Paris Agreement's upper limit.
"While carbon tax rates showed slight increases, price changes within emissions trading systems (ETSs) were mixed with ten systems experiencing price decreases over the past 12 months, including long-standing ETSs in the European Union, New Zealand, and the Republic of Korea," the report notes. "Price levels continue to fall short of the ambition needed to achieve the Paris Agreement goals."
While carbon tax rates showed slight increases in 2023, price changes within emissions trading schemes were mixed with 10 regimes experiencing price decreases over the past 12 months, including schemes in the EU, New Zealand, and the Republic of Korea.
Meanwhile, the World Bank notes that adoption of carbon pricing has been "limited" over the last 12 months, with just two new carbon pricing instruments coming online.
However, it points to progress on carbon pricing implementation in a range of middle-income countries, including Brazil, India, Chile, Colombia, and Türkiye.
The report also hails a broader trend where carbon pricing schemes are being expanded to include a wider range of emissions-intensive sectors. Traditionally, carbon taxes and emissions trading schemes have focused on the power and industrial sectors, but carbon pricing is increasingly being considered for sectors such aviation, shipping and waste, it notes.
Meanwhile, the EU's Carbon Border Adjustment Mechanism - which started its transitional phase this year - is encouraging governments that trade with the bloc to consider introducing their own carbon pricing regimes for export-led sectors such as iron and steel, aluminium, cement, and fertilisers.
"Carbon pricing can be one of the most powerful tools to help countries reduce emissions," said Axel van Trotsenburg, senior managing director at the World Bank. "That's why it is good to see these instruments expand to new sectors, become more adaptable and complement other measures. This report can help expand the knowledge base for policymakers to understand what is working and why both coverage and pricing need to go up for emissions to go down."
Elsewhere, the report notes that more than half of the revenues collected from carbon pricing taxes or schemes in 2023 were used to fund climate and nature-related programmes.
But it also highlights how despite carbon pricing revenues reaching record high, their contribution to countries' national budgets remains relatively low.
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