Carbon pricing: revenue increases, but not enough


Revenues are growing carbon pricing. According to the annual report “State and trends in carbon pricing 2024“the World Bank, last year, received from the “carbon pricing” reached the figure of 104 billion dollars. Not only that: it was increased to 2022, when it reached 95 billion.

This is good news for the climate: the carbon price allows, in fact, to compare an economic value to CO2, which is the basis for entering other sectors of the climate plan. Put another way: “put a price on carbon” help shift the burden of damage to those who are responsible and can work to reduce it. More than half of the revenue is used to finance nature-related projects.

Everything is fine, then? No, as far as we know. However, it should be said that there has been a positive progress over the years: during the First report of the World BankThe most widely used carbon pricing mechanisms, namely carbon taxes and emissions trading systems (ETS), covered only 7% of release world In the 2024 report, we read that 24% of global emissions are covered.

What is carbon pricing?

As World Bank explains itself, Carbon pricing is a tool that captures the external costs of greenhouse gas emissions, which we pay. Let’s think about it

  • damage crops,
  • health costs due to heat waves and droughts,
  • to the losses of the land due to the flood,
  • as the sea level rises.

Carbon pricing links these costs through pricing, in the form of carbon pricing.Carbon dioxide published. It provides an economic signal to the emitters and they can decide whether to change their behavior and reduce emissions, or to continue to emit and pay for the pollution they produce. In this way, the overall environmental objective is achieved in the simplest and least expensive way for society.

As Axel van Trotsenburg, director general of the World Bank, said, “carbon pricing can be one of the the tools are more powerful to help countries reduce emissions.”

Tools and typologies

Although it is not clearly stated in theTreaty of ParisCarbon pricing is an important policy tool that many countries and governments are using to reduce emissions and help meet their climate goals.

It can take many forms. They are here now 75 dedicated tools operates worldwide, but there are two types of carbon pricing: emissions trading systems (ETS) and carbon taxes. ETS accounted for more than 70% of global government carbon pricing last year.

Sweden was the first country to set carbon prices and establish a carbon tax in 1991. The EU ETS, launched in 2005, was the first major carbon market in the world.

Carbon tax and ETS: concepts and differences

There are differences between the two main carbon pricing systems. of the ETS system set a market price for greenhouse gas emissions. The cap, set by the relevant authority or government, helps ensure the reduction of emissions required to keep emitters within a pre-set limit.

There Carbon tax It directly puts a price on carbon by setting a tax on greenhouse gas emissions or – more commonly – on the carbon content of fossil fuels.

Unlike an ETS system, in a carbon tax it is the price that determines the level of emissions.

Benefits of carbon pricing

Putting a price on carbon “is widely regarded as the easiest and most cost-effective way to reduce emissions,” says the United Nations Framework Convention on Climate Change (UNFCCC). Be able to help to facilitate the release methods that are compatible with the provisions of the Paris Agreement about keeping the global temperature increase below 2°C above pre-industrial levels, continuing efforts to limit the increase to 1.5°C.

Also, you can do it stimulate investment and innovation in “green technologies”, increase the relative cost of using technologies with a strong impact on emissions.

A carbon price is what allows us to promote the achievement of the Sustainable Development Goals, the allocation of funds to green projects.

It helps generate income that can be recycled in the green economy through public spending on research and development in green technology. It should be remembered that more than half of the funds collected by carbon pricing systems are used to finance environmental projects.

The effectiveness of carbon pricing systems is supported by the results of an analysis conducted by a research group from the German Mercator Research Institute on Global Commons and Climate Change and the Priestley International Center for Climate, School of Earth and Environment of the University English from Leeds. , published in Nature.

The group assessed the effectiveness of carbon pricing in reducing emissions. He got it, thanks to a study on 21 pricesThe introduction of a carbon price has resulted in immediate reductions and more reductions for less. 17 of these policies, despite the low price in most cases. From –4% to –15% on all programs.

There recorded a total of 104 billion dollars in revenues The first good news comes from carbon pricing, with progress made in recent years by carbon taxes and the ETS.

Also on the positive side is the fact that large central countries, such as Brazil, India, Chile, Colombia and Turkey, are working hard to implement the carbon price. “While traditional sectors such as energy and business continue to thrive, the carbon pricing new sectors such as aviation, maritime transport and waste are being considered,” the report said.

State and trends in carbon pricing 2024

Also, it is said that the Carbon Limit Adjustment Mechanism (CBAM), the EU’s Carbon Border Adjustment Mechanism, currently in the transition process, requiring importers of specific products to report emissions, is encouraging governments to consider why carbon trading for sectors such as iron and steel, aluminum, cement, plants and electricity. .

…and shadows

Carbon tax and ETS They account for a quarter of global greenhouse gas emissions, mostly the same as last year. Revenues from carbon pricing will reach record levels in 2023, exceeding $100 billion for the first time; However, global carbon prices and coverage remain unchanged.

The cap and global levels of the carbon price “will remain too low to meet the goals of the Paris Agreement”. At once, less than 1% of global greenhouse gas emissions covered by a direct carbon price above or above the range recommended by the High-Level Commission on Carbon Pricing to limit temperature rise to below 2°C.

Over 90% of the parties to the Paris Agreement (194 countries and the EU) have set emission reduction targets and more than 95 countries have announced commitments to net zero, covering over 85% of the world’s energy-related CO2. However, in general, countries’ mitigation policy instruments are insufficient to meet current Nationally Determined Contributions (NDCs), which are non-binding national plans outlining climate change actions.

Strong political commitment is required

A serious commitment is needed, especially considering the large amount of subsidies for fossil fuels. about 1300 billion dollars in 2022nearly three times compared to 500 billion in 2020 (shown in The Treasury). This figure “exceeds the revenue collected from carbon taxes and ETS,” the report added.

It is true, as the World Bank analysts show, a fixed part of the global greenhouse gas emissions are covered by carbon taxes and ETS hides a series of big changes. It has been reported that on April 1, 2024, the emissions trading system and the carbon tax will cover the energy of about 13 gigatons of carbon dioxide equivalent, about 24% of global greenhouse gas emissions. Although the sector did not change last year, the level of covered emissions has increased to more than 400 million tons of carbon dioxide equivalent (MtCO2e) in 2023.

Despite this positive trend, it should be noted that the carbon tax and the ETS, currently being studied, can increase global coverage, but may not exceed 30% in the short term. . Of course, with theimplementation of carbon pricing in these large and important economic sectors, there is a risk that global emission coverage may remain below 30% for the foreseeable future.

All of these things compare to the level of interest” and the amount of work needed to respond to the The Global Carbon Market Challengeannounced at COP26 aims to cover 60% of global greenhouse gas emissions by 2030.”

Only in 2024 seven carbon pricing tools, which covers less than 1% of global greenhouse gas emissions, has reached price levels above or above the revised floor of $63 per tCO2e (in 2024 budget). In addition, all carbon pricing systems are below the lower limit of carbon pricing established by the Intergovernmental Panel on Climate Change.

The recommendation is therefore to close the implementation gap between executive orders and national policies, a task that requires greater political commitment.



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