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State and Trends of Carbon Pricing 2021

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This training provides a brief summary of the World Bank's latest annual report on carbon pricing which was published in May 2021: State and Trends of Carbon Pricing 2021. Also, an 12 page executive summary is available here: State and Trends of Carbon Pricing 2021. The video tutorial included under the "Watch" tab is from the 2018 report.

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What is the state of play of carbon pricing?

This year (2021) there are 64 carbon pricing instruments (CPIs) in operation and three scheduled for implementation. This is an increase of six instruments compared to 2020, which had 58 carbon taxes and ETSs (emission trading systems) in operation. 

The countries with the highest prices on carbon include Canada, Denmark, the European Union, Finland, France, Germany, Ireland, Korea, Netherlands, New Zealand, Norway, Sweden, Switzerland, and the United Kingdom.

Of the 15 biggest economies in the world, only three – the United States, India, and Russia – do not have any nationwide carbon pricing in place or in the works. In 2021, 21.5% of global GHG emissions are covered by carbon pricing instruments in operation, representing a significant increase on 2020, when only 15.1% of global emissions were covered. This increase is largely due to the launch of China’s national ETS in February 2021, becoming the world’s largest carbon market, initially covering around 4,000 MtCO2 or 30% of its national GHG emissions. Also, The UK and Germany both launched national carbon markets and carbon taxes in the Netherlands and Luxembourg came into operation.

More governments are adopting net zero targets and we are beginning to see more ambitious carbon pricing instruments. In the EU, ETS allowance prices have hit all-time highs as the bloc steps up both long and short term climate ambition and the market foresees caps tightening following the announcement of the Green Deal. Prices are also increasing in countries like Canada, Germany and Ireland. Greater ambition is also leading more governments to consider carbon border adjustments.  

Where is carbon pricing evolving to?

Carbon pricing can play a role in incentivizing low-carbon action by internalizing the cost of greenhouse gas emissions. However, for it to work, several things are needed: 

  • It must be sufficiently ambitious. Experts say prices of USD $40-$80/tCO 2e are needed to meet the 2°C goal.
  • It must be well designed and adapted to the jurisdictional context.
  • It must form part of a supportive policy package – other policies are needed to drive research and development, unlock non-economic barriers to mitigation and to target emissions reductions with very high abatement costs.
How ambitious are carbon prices globally?

Short-term ambition lags behind and carbon prices are far lower than they need to be.  Countries’ climate plans (Nationally Determined Contributions submitted to the UNFCCC) continue to fall short of what is needed to meet the goals of the Paris Agreement. This limited ambition is reflected in low carbon prices – only 3.76% of emissions are covered by a carbon price above USD $40/tCO 2e (the bottom range of 2020 prices recommended to be Paris compliant). 

The report also includes sections on carbon crediting and internal carbon pricing in companies. It recommends that carbon crediting should play a supplementary role in corporate climate strategies: other solutions are needed too and reducing emissions should be prioritized. It notes that nearly half of the largest 500 companies in the world by market value already have an internal carbon price or intend to adopt one in the coming two years.

Length
Press play to start the video (79m 38s)
Note: This video is from CCL's 2018 Climate Policy Camp and may be dated based on more recent developments
https://vimeo.com/album/5480549
Video Outline
To skip ahead to a specific section go to the time indicated in parenthesis.

Intro and Agenda
(from beginning)

Carbon Pricing Around the World
(6:07)

Trends in Carbon Pricing
(19:22)

International Context
(37:37)

Q&A
(50:08)

Instructor(s)

Dominik Englert

Downloads

Download PowerPoint presentation.

Download the video.
Audio length
Press play to start the audio (79m 38s)
Audio embed code

Note: This video is from CCL's 2018 Climate Policy Camp and may be dated based on more recent developments 

Audio Outline
To skip ahead to a specific section go to the time indicated in parenthesis.

Intro and Agenda
(from beginning)

Carbon Pricing Around the World
(6:07)

Trends in Carbon Pricing
(19:22)

International Context
(37:37)

Q&A
(50:08)

Instructor(s)

Dominik Englert

Discussion Topic
To Print
Instructions for printing this page on Community.
Category
Training
Topics
Climate Policy
Format
Audio / Video, Presentation
File Type
PowerPoint (.pptx)