Current Status of Carbon Pricing Worldwide
Carbon pricing mechanisms include include emissions trading systems (ETS), carbon taxes, carbon credits, and internal carbon pricing. Carbon prices around the world rose during 2021, in large part due to net zero targets and tightening pollution restrictions related to COP26. Other contributing factors have been greater use of coal due to higher natural gas prices, a price floor push from Germany, and upcoming deadlines for options trading. Just 22% of global GHG emissions are priced, and only 4% are priced at Paris-compatible levels. Most ETS’s are focused on heavy industry and power sectors, while carbon taxes sometimes include all sectors. Generally, the taxes are applied to the highest level of the value chain (i.e. producers and importers), and in a minority of cases applied directly to users. In the US, a methane fee is under consideration in Congress. It would apply a tax of $900/ton to oil & gas operations in 2023, increasing to $1500/ton in 2025. Europe has the most mature ETS, with other carbon pricing leaders being Canada and, South Korea, and New Zealand.
Carbon pricing is an effective economic measure for refelcting the true costs associated with greenhous gas emissions. This report provides an introduction to the different types of carbon pricing mechanisms, current global price levels, sectors that are covered by carbon pricing, gives context to the current scope and scale of carbon pricing coverage, addresses the pricing level needed to reduce emissions and the effectiveness of using carbon pricing, and shows which countries or regions currently use or are considering implementing carbon pricing.
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